Adeia Inc. 10-K

Item 9A. Controls and Procedures Attached as exhibits to this Form 10-K are certifications of Xperi Holding Corporation’s Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications and it should be read in conjunction with the certifications, for a more complete understanding of the topics presented. Evaluation of Disclosure Controls and Procedures Xperi Holding Corporation maintains disclosure controls and procedures that are designed to ensure information required to be disclosed in our reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the evaluation date). Based on this evaluation, because of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2020. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for Xperi Holding Corporation. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Xperi Holding Corporation’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Xperi Holding Corporation; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Xperi Holding Corporation are being made only in accordance with authorizations of management and directors of Xperi Holding Corporation; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Xperi Holding Corporation’s assets that could have a material effect on the financial statements. Xperi Holding Corporation’s management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment by Xperi Holding Corporation’s management, we determined that the Company’s internal control over financial reporting as of December 31, 2020 was not effective due to the material weaknesses described below. 73 The Company did not design and maintain effective controls related to the review of cash flow forecasts used in the valuation of intangible assets acquired in a business combination and the goodwill impairment analyses. Specifically, the control activities related to the review of the inputs and assumptions used in the development of the cash flow forecast used in the valuation of intangible assets acquired in a business combination and goodwill impairment analyses were not designed at an appropriate level of precision to prevent or detect a material misstatement. These control deficiencies did not result in a misstatement to our consolidated financial statements for the year ended December 31, 2020. However, these control deficiencies, if not remediated, could result in a misstatement to the annual or interim consolidated financial statements which would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected . Accordingly, our management has determined that these control deficiencies constitute material weaknesses. We have excluded the business associated with the acquisition of TiVo Corporation ( “TiVo”) from our assessment of internal control over financial reporting as of December 31, 2020 because the entity was acquired by the Company in a merger accounted for as a business combination during 2020. The total assets and total revenue of TiVo represent 14% and 67%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. The effectiveness of Xperi Holding Corporation’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page F-1 of this Annual Report on Form 10-K. Remediation Plans Our management, with oversight from our Audit Committee, is in the process of developing and implementing remediation plans in response to the identified material weaknesses described above. Specifically, we are designing and implementing additional control activities over the review of the inputs and assumptions in our cash flow forecasts. These controls are expected to require additional documentation and the development of procedures related to the valuation of intangible assets acquired in a business combination and goodwill impairment calculations. These material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We believe the measures described above will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. Changes in Internal Control over Financial Reporting As required by Rule 13a-15(d) under the Exchange Act, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the Company’s internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter covered by this annual report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the fourth fiscal quarter of 2020. Item 9B. Other Information Not applicable. 74 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 is hereby incorporated by reference from the information under the captions “Executive Officers,” “Election of Directors” and “Delinquent Section 16(a) Reports” that will be contained in the Proxy Statement for our 2021 Annual Meeting of Stockholders (the “Proxy Statement”). We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons serving similar functions. The text of our code of business conduct and ethics has been posted on our website at http://www.xperi.com. and is included as an exhibit to our Current Report on Form 8-K filed with the SEC on December 1, 2016. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference from the information under the captions “Election of Directors,” “Compensation Discussion and Analysis,” “Compensation of Named Executive Officers” and “Report of the Compensation Committee” that will be contained in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 is incorporated by reference from the information under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” that will be contained in the Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 is incorporated by reference from the information under the captions “Certain Relationships and Related Transactions” and “Election of Directors” that will be contained in the Proxy Statement. Item 14. Principal Accountant Fees and Services The information required by this Item 14 is incorporated by reference from the information under the caption “Ratification of Independent Registered Public Accounting Firm” that will be contained in the Proxy Statement. 75 PART IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of this report: Page Number (1) Financial Statements Report of Independent Registered Public Accounting Firm F-1 Consolidated Statements of Operations F-5 Consolidated Statements of Comprehensive Income (loss) F-6 Consolidated Balance Sheets F-7 Consolidated Statements of Cash Flows F-8 Consolidated Statements of Equity F-9 Notes to Consolidated Financial Statements F-10 (2) Financial Statement Schedule Valuation and Qualifying Accounts (3) Exhibits The exhibits listed on the Exhibit Index preceding the signature page to this Annual Report are filed as part of this Annual Report. 76 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Xperi Holding Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Xperi Holding Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2020 appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to the Company not designing and maintaining effective controls related to the review of cash flow forecasts used in the valuation of intangible assets acquired in a business combination and goodwill impairment analyses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness es referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A . We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Changes in Accounting Principles As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue in 2018. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the F-1 risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the business assoc iated with the acquisition of TiVo Corporation (the “ TiVo business ” ) from its assessment of internal control over financial reporting as of December 31, 2020 because TiVo was acquired by the Company in a merger accounted for a s a business combination during 2020. We have also excluded the TiVo business from our audit of internal control over financial reporting. The TiVo business has total assets and total revenues excluded from management's assessment and our audit of internal control over financial reporting representing approximately 14% and 67% , respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue recognition – Allocation of Transaction Price in Fixed-Fee Media IP Licensing Arrangements As described in Note 4 to the consolidated financial statements, at times, the Company enters into long-term fixed- fee media IP license agreements in which a licensee is released from past patent infringement claims or is granted a license to ship an unlimited number of units or for an unlimited number of subscribers over a future period for a fixed fee. In these arrangements, management allocates the transaction price between the release for past patent infringement claims and the future license. Revenue from the initial contract recognition of fixed-fee media IP licensing arrangements, which are related to the TiVo businesses, which were acquired in a merger during 2020, is a component of the total IP segment revenue of $515.9 million for the year ended December 31, 2020. In determining the stand-alone selling price of the release for past patent infringement claims and the future license, management considers such factors as the number of units shipped in the past or the number of past subscribers and the relevant geographies of the shipped units or subscribers, the future number of subscribers or units, as well as the licensing rate the Company generally receives for per subscriber or units shipped in the same geographies. The principal considerations for our determination that performing procedures relating to revenue recognition – allocation of transaction price in fixed-fee media IP licensing arrangements is a critical audit matter are the significant judgment by management in (i) estimating the standalone selling price for certain performance obligations and (ii) allocating the transaction price on a relative standalone selling price basis to those individual performance obligations; this in turn led to significant auditor judgment, subjectivity and effort in performing procedures to evaluate management’s estimates of standalone selling price and the allocation of transaction price to the individual performance obligations. F-2 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the following for a sample of contracts, (i) reading executed contracts to understand the terms and conditions and performance obligations, (ii) evaluating management’s identification of the individual performance obligations, (iii) testing management’s determination of the transaction price and the allocation of the transaction price to the individual performance obligations based on relative standalone selling price, and (iv) evaluating and testing the reasonableness of the factors used in management’s estimation of standalone selling price. Testing the estimation of standalone selling price involved testing the completeness and accuracy of the data utilized by management. TiVo Merger – Valuation of Acquired Intangible Assets As described in Notes 1, 2 and 9 to the consolidated financial statements, on December 18, 2019, Xperi Corporation (“Xperi”) entered into an Agreement and Plan of Merger and Reorganization with TiVo Corporation (“TiVo”) to combine in an all-stock merger of equals transaction (the “Mergers”). The merger consideration was calculated to be $828.3 million. The Company measured the identifiable assets acquired and liabilities assumed at fair value, which resulted in the recognition of $878.0 million of intangible assets. Identifiable intangible assets primarily consist of patents, developed technology, customer relationships, trademarks and tradenames, and content database. In determining the fair value, the Company utilized various forms of the income, cost and market approaches depending on the asset. The estimation of fair value required significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined using historical data supplemented by current and anticipated market conditions, and growth rates. Customer contracts and relationships relating to the IP business segment were valued using a “with and without” method. Significant assumptions used in this discounted cash flow analysis are the revenue growth rate, cost of sales, and discount rate. Patents, and other customer contracts and relationships relating to the Product business segment, were valued using an excess earnings method. Significant assumptions used in the discounted cash flow analysis for (i) other customer contracts and relationships were the revenue growth rate, EBITDA margins, and discount rate and (ii) patents were the revenue growth rate, EBITDA margins, and discount rate. Trademarks and tradenames, developed technology, and content database intangible assets were valued using a relief-from-royalty method. The significant assumptions used in the discounted cash flow analysis for (i) trademarks and tradenames were royalty rates, revenue growth rates, and discount rate and (ii) developed technology and content database were the royalty rates. The principal considerations for our determination that performing procedures relating to the TiVo merger – valuation of acquired intangible assets is a critical audit matter are the significant judgment by management when determining the fair value estimates of the intangible assets acquired; this in turn led to significant auditor judgment, subjectivity, and effort in performing procedures relating to the fair value measurement of the intangible assets acquired and in evaluating management’s significant assumptions related to, (i) revenue growth rate, cost of sales, and discount rate for the customer contracts and relationships related to the IP business segment; (ii) revenue growth rate, EBITDA margins, and discount rate for other customer contracts and relationships related to the Product business segment; (iii) revenue growth rate, EBITDA margins, and discount rate for the patents, (iv) royalty rates, revenue growth rates, and discount rate for the trademarks and tradenames, and (v) royalty rates for the developed technology and content database intangible assets. Also, the audit effort involved the use of professionals with specialized skill and knowledge. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter specific to the precision of the design of controls relating to the review of the inputs and assumptions used in the development of the cash flow forecasts used in the valuation of intangible assets. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of certain controls relating to the valuation of the acquired intangible assets, including controls over (i) management’s review of the valuation methods and completeness of intangible assets acquired and (ii) review of significant assumptions related to the royalty rates and discount rates. These procedures also included, among others, reading the purchase agreement and testing management’s process in determining the fair value of the intangible assets acquired. Testing management’s process included (i) evaluating the appropriateness of the valuation methods, (ii) testing the completeness and accuracy of data used by management, and (iii) evaluating the reasonableness of significant assumptions used by management related to the revenue growth rates, cost of sales, EBITDA margins, royalty rates, and discount rates. Evaluating the reasonableness of management’s significant assumptions related to revenue growth rates, EBITDA margins, and cost of sales involved considering (i) past performance of the acquired business, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the methods used to value the acquired intangible assets, and the royalty rate and discount rate assumptions. Goodwill Impairment Assessments - Product Reporting Unit F-3 As described in Notes 2 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $847.0 million as of December 31, 2020, and the goodwill associated with the Product reporting unit was $523.8 million. Goodwill is evaluated for potential impairment annually and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. As of March 31, 2020, the Company proceeded with a quantitative interim goodwill impairment test and as a result, the Company concluded that the fair value of the reporting unit exceeded the carrying amount and no goodwill impairment charges were recognized. As of September 30, 2020, the Company proceeded with a quantitative annual goodwill impairment test and as a result, the Company concluded that the fair value of the reporting unit exceeded the carrying amount and no goodwill impairment charges were recognized. The Company first determines the fair value of a reporting unit using weighted results derived from an income approach and market approaches. The fair value using an income approach is estimated through the discounted cash flow method based on assumptions about future conditions such as revenue growth rates, operating expenses, EBITDA, discount rates, and other assumptions . Market approaches used by management include the market comparable method, which estimates the fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value by utilizing comparable transactions and transaction multiples. The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Product reporting unit is a critical audit matter are the significant judgment by management when determining the fair value of the reporting unit, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, operating expenses, EBITDA, and discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter specific to the precision of the design of controls relating to the review of the inputs and assumptions used in the development of the cash flow forecasts used to estimate the fair value of the reporting unit in performing the goodwill impairment analysis. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of certain controls relating to management’s goodwill impairment assessments of the Product reporting unit, including controls over (i) management’s review of the comparison of fair value and carrying value of the reporting unit, (ii) review of the valuation approach utilized and (iii) review of the discount rate assumption. These procedures also included, among others, (i) testing management’s process for determining the fair value of the Product reporting unit, (ii) evaluating the appropriateness of the valuation approach, (iii) testing the completeness and accuracy of underlying data used in the estimate, and (iv) evaluating the significant assumptions related to the revenue growth rates, operating expenses, EBITDA, and discount rate. Evaluating management’s significant assumptions related to the revenue growth rates, operating expenses, and EBITDA involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the valuation approach used in estimating the fair value of the reporting unit, and the discount rate assumption. /s/ PricewaterhouseCoopers LLP San Jose, California February 26, 2021 We have served as the Company’s auditor since 1999. F-4 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years Ended December 31, 2020 2019 2018 Revenue: Licensing, services and software $ 876,603 $ 279,513 $ 404,940 Hardware 15,417 554 1,193 Total revenue 892,020 280,067 406,133 Operating expenses: Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets 57,280 8,129 12,713 Cost of hardware revenue, excluding depreciation and amortization of intangible assets 21,077 331 578 Research, development and other related costs 195,154 110,850 104,856 Selling, general and administrative 245,356 117,671 122,781 Depreciation expense 17,918 6,721 6,676 Amortization expense 156,826 99,946 108,450 Litigation expense 20,782 5,127 26,099 Total operating expenses 714,393 348,775 382,153 Operating income (loss) 177,627 ( 68,708 ) 23,980 Interest expense ( 37,873 ) ( 23,377 ) ( 25,665 ) Other income and expense, net 4,455 9,028 8,595 Loss on debt extinguishment ( 8,300 ) — — Income (loss) before taxes 135,909 ( 83,057 ) 6,910 Provision for (benefit from) income taxes ( 7,887 ) ( 19,024 ) 8,673 Net income (loss) 143,796 ( 64,033 ) ( 1,763 ) Less: Net loss attributable to noncontrolling interest ( 2,966 ) ( 1,503 ) ( 1,474 ) Net income (loss) attributable to the Company $ 146,762 $ ( 62,530 ) $ ( 289 ) Income (loss) per share attributable to the Company: Basic $ 1.77 $ ( 1.27 ) $ ( 0.01 ) Diluted $ 1.75 $ ( 1.27 ) $ ( 0.01 ) Weighted average number of shares used in per share calculations-basic 82,840 49,120 48,823 Weighted average number of shares used in per share calculations-diluted 83,856 49,120 48,823 The accompanying notes are an integral part of these consolidated financial statements. F-5 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended December 31, 2020 2019 2018 Net income (loss) $ 143,796 $ ( 64,033 ) $ ( 1,763 ) Other comprehensive income (loss), net of tax: Change in foreign currency translation adjustment 1,345 — — Net unrealized gains (losses) on available-for-sale debt securities ( 28 ) 275 ( 25 ) Other comprehensive income (loss), net of tax 1,317 275 ( 25 ) Comprehensive income (loss) 145,113 ( 63,758 ) ( 1,788 ) Less: Comprehensive loss attributable to noncontrolling interest ( 2,966 ) ( 1,503 ) ( 1,474 ) Comprehensive income (loss) attributable to the Company $ 148,079 $ ( 62,255 ) $ ( 314 ) The accompanying notes are an integral part of these consolidated financial statements. F-6 XPERI HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 170,188 $ 74,551 Available-for-sale debt securities, at fair value (amortized cost and allowance for credit losses of $ 86,963 and $ 0 , respectively, at December 31, 2020) 86,947 45,802 Equity securities — 1,124 Accounts receivable, net of allowance for credit losses of $ 7,336 and $ 566 , respectively 115,975 24,177 Unbilled contracts receivable 132,431 121,826 Other current assets 40,763 13,735 Total current assets 546,304 281,215 Long-term unbilled contracts receivable 6,761 26,672 Property and equipment, net 63,207 32,877 Operating lease right-of-use assets 80,226 17,786 Intangible assets, net 1,004,379 232,275 Goodwill 847,029 385,784 Other long-term assets 153,270 71,336 Total assets $ 2,701,176 $ 1,047,945 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 13,045 $ 4,650 Accrued legal fees 5,783 1,316 Accrued liabilities 129,035 41,433 Current portion of long-term debt 43,689 — Deferred revenue 33,119 720 Total current liabilities 224,671 48,119 Deferred revenue, less current portion 39,775 — Long-term deferred tax liabilities 24,754 29,735 Long-term debt, net 795,661 334,679 Noncurrent operating lease liabilities 66,243 13,414 Other long-term liabilities 98,953 76,898 Total liabilities 1,250,057 502,845 Commitments and contingencies (Note 16) Company stockholders’ equity: Preferred stock: $ 0.001 par value; authorized (2020: 15,000 shares; 2019: 10,000 shares) and no shares issued and outstanding — — Common stock: $ 0.001 par value; (2020: authorized 350,000 shares, issued 110,182 shares, outstanding 104,775 shares; 2019: authorized 150,000 shares, issued 63,622 shares, outstanding 49,620 shares) 110 64 Additional paid-in capital 1,268,471 768,284 Treasury stock at cost (2020: 5,407 shares; 2019: 14,002 shares) ( 77,218 ) ( 368,701 ) Accumulated other comprehensive income (loss) 1,264 ( 53 ) Retained earnings 264,250 148,317 Total Company stockholders’ equity 1,456,877 547,911 Noncontrolling interest ( 5,758 ) ( 2,811 ) Total equity 1,451,119 545,100 Total liabilities and equity $ 2,701,176 $ 1,047,945 The accompanying notes are an integral part of these consolidated financial statements. F-7 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net income (loss) $ 143,796 $ ( 64,033 ) $ ( 1,763 ) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation of property and equipment 17,918 6,721 6,676 Amortization of intangible assets 156,826 99,946 108,450 Stock-based compensation expense 39,135 31,554 31,011 Deferred income tax ( 34,670 ) ( 38,611 ) ( 15,578 ) Loss on debt extinguishment 8,300 — — Other 19,500 2,654 5,322 Changes in operating assets and liabilities, net of business acquisitions: Accounts receivable 7,091 6,191 ( 14,381 ) Unbilled contracts receivable, net 76,262 130,359 25,503 Other assets ( 41,948 ) 3,675 ( 950 ) Accounts payable ( 4,863 ) 1,886 ( 1,469 ) Accrued and other liabilities 21,692 ( 8,679 ) ( 8,915 ) Deferred revenue 18,564 ( 2,410 ) 1,227 Net cash from operating activities 427,603 169,253 135,133 Cash flows from investing activities: Purchases of property and equipment ( 7,379 ) ( 8,813 ) ( 3,338 ) Proceeds from sale of property and equipment — 55 — Net cash received (paid) for mergers and acquisitions 117,424 — ( 500 ) Purchases of short-term investments ( 77,178 ) ( 40,008 ) ( 20,095 ) Proceeds from sales of short-term investments 11,225 6,833 8,540 Proceeds from maturities of short-term investments 24,683 27,290 30,925 Purchases of intangible assets ( 50,935 ) ( 4,500 ) ( 4,100 ) Net cash from investing activities 17,840 ( 19,143 ) 11,432 Cash flows from financing activities: Repayment of debt ( 520,250 ) ( 150,000 ) ( 100,000 ) Repayment of assumed debt from merger transaction ( 734,609 ) — — Proceeds from debt, net 1,010,286 — — Contingent consideration payments after acquisition — ( 1,200 ) ( 419 ) Dividend paid ( 30,829 ) ( 39,502 ) ( 39,187 ) Proceeds from exercise of stock options 91 695 8,008 Proceeds from employee stock purchase program 4,764 5,329 5,196 Repurchases of common stock ( 80,589 ) ( 4,506 ) ( 44,798 ) Net cash from financing activities ( 351,136 ) ( 189,184 ) ( 171,200 ) Effect of exchange rate changes on cash and cash equivalents 1,330 — — Net increase (decrease) in cash and cash equivalents 95,637 ( 39,074 ) ( 24,635 ) Cash and cash equivalents at beginning of period 74,551 113,625 138,260 Cash and cash equivalents at end of period $ 170,188 $ 74,551 $ 113,625 Supplemental disclosure of cash flow information: Interest paid $ 31,240 $ 20,891 $ 23,134 Income taxes paid, net of refunds $ 43,066 $ 15,001 $ 23,679 Stock issued in merger transaction $ 828,334 $ — $ — The accompanying notes are an integral part of these consolidated financial statements. F-8 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF EQUITY (in thousands) Total Company Stockholders' Equity Common Stock Additional Paid-In Treasury Stock Accumulated Other Comprehensive Retained Noncontrolling Shares Amount Capital Shares Amount Income (Loss) Earnings Interest Total Equity Balance at December 31, 2017 49,103 $ 60 $ 686,660 11,505 $ ( 319,397 ) $ ( 303 ) $ 68,556 $ — $ 435,576 Cumulative-effect adjustment from adoption of ASU 2014-09 — — — — — — 224,128 — 224,128 Issuance of subsidiary shares to noncontrolling interest — — ( 179 ) — — — — 179 — Net loss — — — — — — ( 289 ) ( 1,474 ) ( 1,763 ) Other comprehensive loss, net of tax — — — — — ( 25 ) — — ( 25 ) Cash dividends paid on common stock ($ 0.80 per share) — — — — — — ( 39,187 ) — ( 39,187 ) Issuance of common stock in connection with exercise of stock options 427 1 8,007 — — — — — 8,008 Issuance of common stock in connection with employee stock purchase plan 306 — 5,196 — — — — — 5,196 Issuance of restricted stock, net of shares canceled 871 1 — — — — — — 1 Repurchases of common stock, shares exchanged ( 162 ) — — 162 ( 3,429 ) — — — ( 3,429 ) Repurchases of common stock ( 2,137 ) — — 2,137 ( 41,369 ) — — — ( 41,369 ) Stock-based compensation expense — — 31,011 — — — — — 31,011 Balance at December 31, 2018 48,408 $ 62 $ 730,695 13,804 $ ( 364,195 ) $ ( 328 ) $ 253,208 $ ( 1,295 ) $ 618,147 Issuance of subsidiary shares to noncontrolling interest — — 13 — — — — ( 13 ) — Net loss — — — — — — ( 62,530 ) ( 1,503 ) ( 64,033 ) Other comprehensive income, net of tax — — — — — 275 — — 275 Other — — — — — — ( 2,859 ) — ( 2,859 ) Cash dividends paid on common stock ($ 0.80 per share) — — — — — — ( 39,502 ) — ( 39,502 ) Issuance of common stock in connection with exercise of stock options 42 — 694 — — — — — 694 Issuance of common stock in connection with employee stock purchase plan 386 1 5,328 — — — — — 5,329 Issuance of restricted stock, net of shares canceled 982 1 — — — — — — 1 Repurchases of common stock, shares exchanged ( 198 ) — — 198 ( 4,506 ) — — — ( 4,506 ) Stock-based compensation expense — — 31,554 — — — — — 31,554 Balance at December 31, 2019 49,620 $ 64 $ 768,284 14,002 $ ( 368,701 ) $ ( 53 ) $ 148,317 $ ( 2,811 ) $ 545,100 Issuance of subsidiary shares to noncontrolling interest — — ( 19 ) — — — — 19 — Net income (loss) — — — — — — 146,762 ( 2,966 ) 143,796 Other comprehensive income, net of tax — — — — — 1,317 — — 1,317 Cash dividends paid on common stock ($ 0.50 per share) — — — — — — ( 30,829 ) — ( 30,829 ) Issuance of common stock in connection with exercise of stock options 7 — 89 — — — — — 89 Issuance of common stock in connection with employee stock purchase plan 355 — 4,764 — — — — — 4,764 Issuance of restricted stock, net of shares canceled 2,083 2 — — — — — — 2 Repurchases of common stock, shares exchanged ( 671 ) — — 671 ( 10,508 ) — — — ( 10,508 ) Repurchases of common stock ( 4,919 ) — — 4,919 ( 70,081 ) — — — ( 70,081 ) Common stock issued in merger transaction 58,300 58 828,276 — — — — — 828,334 Retirement of treasury stock — ( 14 ) ( 372,058 ) ( 14,185 ) 372,072 — — — — Stock-based compensation expense — — 39,135 — — — — — 39,135 Balance at December 31, 2020 104,775 $ 110 $ 1,268,471 5,407 $ ( 77,218 ) $ 1,264 $ 264,250 $ ( 5,758 ) $ 1,451,119 The accompanying notes are an integral part of these consolidated financial statements . F-9 XPERI HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION On December 18, 2019, Xperi Corporation (“Xperi”) entered into an Agreement and Plan of Merger and Reorganization with TiVo Corporation (“TiVo”) to combine in an all-stock merger of equals transaction (the “Mergers”). Immediately following the consummation of the Mergers on June 1, 2020 , (the “Merger Date”), Xperi Holding Corporation (the “Company”), a Delaware corporation founded in December 2019 under the name “XRAY-TWOLF HoldCo Corporation,” became the parent company of both Xperi and TiVo. The common stock of Xperi and TiVo were de-registered after completion of the Mergers. On June 2, 2020, Xperi Holding Corporation’s common stock, par value $ 0.001 per share, commenced trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “XPER.” See “Note 9 – Business Combination” for a more detailed description of the Mergers. Xperi was determined to be the accounting acquirer in the Mergers. As a result, the historical financial statements of Xperi for periods prior to the Mergers are considered to be the historical financial statements of Xperi Holding Corporation. As used herein, the “Company” refers to Xperi when referring to periods prior to June 1, 2020 and to Xperi Holding Corporation when referring to periods subsequent to June 1, 2020. The Company’s results of operations include the operations of TiVo after June 1, 2020, and TiVo’s assets and liabilities were recorded at their estimated fair values in the Company’s Consolidated Balance Sheets as of June 1, 2020. See “Note 9 – Business Combination” for additional information on the Mergers. Xperi Holding Corporation is a leading consumer and entertainment product/solutions licensing company and one of the industry’s largest intellectual property (IP) licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide. The Company invents, develops, and delivers technologies that enable extraordinary experiences. The Company’s technologies, delivered via its brands (DTS, HD Radio, IMAX Enhanced, Invensas, and TiVo), and by its subsidiary, Perceive Corporation, make entertainment more entertaining, and smart devices smarter. The Company’s technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for customers, partners and consumers. The Company shapes how millions of consumers access and experience entertainment content, and the Company’s innovations are found in billions of devices and hundreds of millions of interfaces around the globe. The Company has two principal segments, a product segment and an IP licensing segment. The Product segment consists primarily of licensing Company-developed audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions. Audio, digital radio, imaging solutions and edge-based machine learning include the delivery of software and/or hardware-based solutions to the Company’s consumer electronics (“CE”) customers, automotive manufacturers or their supply chain partners. UX products and services revenue is primarily derived from multi-channel video service providers and CE manufacturers, licensing the TiVo service and selling TiVo-enabled devices like the Stream 4K, Personalized Content Discovery, enriched Metadata, viewership data and advertising. The IP Licensing segment consists primarily of licensing the Company’s innovations to leading companies in the media and semiconductor industries. Licensing arrangements include access to one or more of the Company’s foundational patent portfolios and may also include access to some of its industry-leading technologies and proven know-how. In media, the Company’s licensees include multichannel video programming distributors (MVPDs), over-the-top (OTT) video service providers, consumer electronics manufacturers, social media, and other new media companies. In semiconductor, the Company’s licensees include memory, sensors, RF component, and foundry companies. The consolidated financial statements include the accounts of Xperi Holding Corporation, its wholly owned subsidiaries, and a majority-owned subsidiary. In the fourth quarter of 2018, the Company funded a new subsidiary, Perceive Corporation (“Perceive”), which was created to focus on delivering edge inference solutions. As of December 31, 2020, the Company owned approximately 81 % of Perceive. The operating results of Perceive have been consolidated in the Company’s consolidated financial statements since the fourth quarter of 2018. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). All significant intercompany balances and transactions are eliminated in consolidation. The Company’s fiscal year ends on December 31. The Company employs a calendar month-end reporting period for its quarterly reporting. F-10 Reclassification As a result of the Mergers, certain reclassifications of prior period amounts have been made to improve comparability and conform to the current period presentation. Presentation changes were made to the Consolidated Statements of Operations. In addition, certain reclassifications of prior period data have been made in the Notes to Consolidated Financial Statements to conform to the current period presentation. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates and assumptions that require management’s most significant, challenging, and subjective judgment include the estimation of licensees’ quarterly royalties prior to receiving the royalty reports, the determination of stand-alone selling price and the transaction price in an arrangement with multiple performance obligations, the estimation of variable consideration, judgment used to estimate the progress toward completion in the Company’s engineering services, the collectability of accounts receivable, other intangible assets and investments, the assessment of the recoverability of goodwill, the assessment of useful lives and recoverability of other intangible assets and long-lived assets, recognition and measurement of current and deferred income tax assets and liabilities, the assessment of unrecognized tax benefits, and purchase accounting resulting from business combinations, among others. Actual results experienced by the Company may differ from management’s estimates. The COVID-19 pandemic has resulted in a global slowdown of economic activity which is likely to reduce the future demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the virus is fully contained. The Company’s business operations have been negatively impacted by the COVID-19 pandemic and related events and the Company expects this disruption to continue to have a negative impact on its revenue and results of operations, the size and duration of which is currently difficult to predict. The impact to date has included a decline in demand in various markets and industries, particularly the automotive market. Although the Company is unable to predict the full impact and duration of COVID-19 on its business, the Company is actively managing its financial expenditures in response to the current uncertainty. The impact of the COVID-19 pandemic and related events, including actions taken by various government authorities in response, have increased market volatility and make the estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes more difficult. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to a customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services, which may include various combinations of goods and services which are generally capable of being distinct and accounted for as separate performance obligations. See “Note 4 – Revenue” for a detailed discussion on revenue and revenue recognition. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions. Short-term Investments The Company has investments in debt securities which include corporate bonds and notes, treasury and agency notes and bills, commercial paper, certificates of deposit, and in equity securities consisting of money market funds and common equity securities of publicly traded companies. The Company classifies all investments as current as the securities are available for use, if needed, for current operations. F-11 Marketable Debt Securities The Company classifies its debt securities as available-for-sale (“AFS”), which are accounted for at fair value. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income or loss on the Consolidated Balance Sheets. Marketable Equity Securities Marketable equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, on the Consolidated Statements of Operations. Non-Marketable Equity Investments Investments in non-marketable equity securities are accounted for using either the equity method or the cost method. Investments in entities over which the Company has the ability to exercise significant influence, but does not hold a controlling interest, are accounted for using the equity method. Under the equity method, the Company records its proportionate share of income or loss in other income and expense, net, in the Consolidated Statements of Operations. Investments in entities over which the Company does not have the ability to exercise significant influence are accounted for using the cost method. The Company monitors its non-marketable securities portfolio for potential impairment. When the carrying amount of an investment in a non-marketable security exceeds its fair value and the decline in fair value is determined to be other-than-temporary, the loss is recorded in other income and expense, net, in the Consolidated Statements of Operations. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of these instruments. Long-term debt is carried at amortized cost and measured at fair value on a quarterly basis for disclosure purposes. See “Note 7 – Fair Value” for further information . Concentration of Credit and Other Risks Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, short-term investments and accounts receivable. The Company follows a corporate investment policy which sets credit, maturity and concentration limits and regularly monitors the composition, market risk and maturities of these investments. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary but generally requires no collateral. At December 31, 2020, the Company had two customers representing 17 % and 11 % of aggregate trade receivables, respectively. At December 31, 2019, the Company had three customers representing 17 %, 14 % and 11 % of aggregate trade receivables, respectively. F-12 The following table sets forth revenue generated from customers which comprise 10% or more of total revenue for the periods indicated: Years Ended December 31, 2020 2019 2018 Comcast Corporation 27 % * * SK hynix Inc. * 17 % 12 % Intel Corporation * 11 % * Samsung Electronics, Co. Ltd. * * 38 % * denotes less than 10% of total revenue. The Company’s TiVo service is enabled using a DVR manufactured by a third-party. The Company also outsources to third parties certain supply-chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics. The Company cannot be sure that these parties will perform their obligations as expected or that any revenue, cost savings or other benefits will be derived from the efforts of these parties. If any of these parties breaches or terminates their agreement with the Company or otherwise fails to perform their obligations in a timely manner, the Company may be delayed or prevented from commercializing its products and services. Allowance for Credit Losses The allowance for credit losses, which includes the allowance for accounts receivable and unbilled contracts receivable, represents the Company’s best estimate of lifetime expected credit losses inherent in those financial assets. The Company’s lifetime expected credit losses are determined using relevant information about past events (including historical experience), current conditions, and reasonable and supportable forecasts that affect collectability. The Company monitors its credit exposure through ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. In addition, the Company performs routine credit management activities such as timely account reconciliations, dispute resolution, and payment confirmations. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. See “Note 4 – Revenue” for a further discussion of the allowance for credit losses. Inventory Inventories consist primarily of finished DVRs, non-DVRs, including TiVo Stream 4K, and accessories and are stated at the lower of cost or net realizable value on an aggregate basis. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Adjustments to reduce the carrying amount of inventory to the lower of cost or net realizable value are made, if required, for excess or obsolete goods, which includes a review of, among other factors, demand requirements and market conditions. Business Combinations The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition related costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. The Company utilizes commonly accepted valuation techniques, such as the income approach and the cost approach, as appropriate, in establishing the fair value of intangible assets. Typically, key assumptions include projections of cash flows that arise from identifiable intangible assets of acquired businesses as well as discount rates based on an analysis of the weighted average cost of capital, adjusted for specific risks associated with the assets. See “Note 9 – Business Combination” for additional detail. F-13 Goodwill and Identified Intangible Assets Goodwill . Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and identified intangible assets acquired under a business combination. Goodwill also includes acquired assembled workforce, which does not qualify as an identifiable intangible asset. The Company reviews impairment of goodwill annually in the fourth quarter, or more frequently if events or circumstances indicate that the goodwill might be impaired. The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. If, based on the qualitative assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company proceeds to perform the quantitative goodwill impairment test. The Company first determines the fair value of a reporting unit using weighted results derived from an income approach and a market approach. The fair value using an income approach is estimated through the discounted cash flow method based on assumptions about future conditions such as revenue growth rates, operating expenses, EBITDA, discount rates, and other assumptions. Market approaches used by management include the market comparable method, which estimates the fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value of the reporting unit by utilizing comparable transactions and transaction multiples. The Company then compares the derived fair value of a reporting unit with its carrying amount. If the carrying value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Identified intangible assets . Identified finite-lived intangible assets consist of acquired patents, existing technology, customer relationships, trademarks and trade names, non-compete agreements resulting from business combinations, and acquired patents under asset purchase agreements. The Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from 1 to 15 years . The Company makes judgments about the recoverability of finite-lived intangible assets whenever facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, the Company assesses recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the Company would accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. Identified indefinite-lived intangible assets include TiVo tradenames and trademarks resulting from business combinations. The Company evaluates the carrying value of indefinite-lived intangible assets on an annual basis, and an impairment charge would be recognized to the extent that the carrying amount of such assets exceeds their estimated fair value. For further discussion of goodwill and identified intangible assets, see “Note 10 – Goodwill and Identified Intangible Assets .” Debt Discount and Issuance Costs Debt discount and issuance costs are presented in the consolidated balance sheet as a deduction from the carrying amount of both the short-term debt and long-term debt, and are amortized over the term of the associated debt to interest expense using the effective interest method. In addition, the Company elects to continue to defer the unamortized debt discount and issuance costs when it voluntarily pays down a portion of the debt as the prepayment is factored into the terms agreed to on the debt. Treasury Stock The Company accounts for stock repurchases using the cost method. For reissuance of treasury stock, to the extent that the reissuance price is more than the cost, the excess is recorded as an increase to capital in excess of par value. If the reissuance price is less than the cost, the difference is recorded in capital in excess of par value to the extent there is a cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the sale of treasury stock below cost is recorded as a reduction of retained earnings. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and noncurrent operating lease liabilities in the Company’s consolidated balance sheets. The ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the F-14 Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company generally use s its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term . As a practical expedient, the Company elected, for all office and facility leases, not to separate nonlease components from lease components and instead to account for each separate lease component and its associated non-lease components as a single lease component. For additional information regarding the Company's leases , refer to “Note 8 – Leases .” Research, Development and Other Related Costs Research, development (“R&D”) and other related costs are comprised primarily of employee-related costs, stock-based compensation expense, engineering consulting expenses associated with new product and technology development, product commercialization, quality assurance and testing costs, as well as costs related to patent applications and examinations, product "tear downs" and reverse engineering, materials, supplies, equipment depreciation and an allocation of facilities costs. All research, development and other related costs are expensed as incurred. Stock-based Compensation Expense Stock-based compensation is measured at the grant date based on the estimated fair value of the award and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service or performance period. Forfeiture rates are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. If the actual forfeiture rate is materially different from the estimate, stock-based compensation expense could be significantly different from what was recorded in the current period. The Company uses the closing trading price of its common stock on the date of grant as the fair value of awards of restricted stock units (“RSUs”), and performance stock units (“PSUs”) that are based on company-designated performance targets. For performance stock units that are based on market conditions, or market-based PSUs, fair value is estimated by using a Monte Carlo simulation on the date of grant. The Company estimates the grant-date fair value of stock options and stock to be issued under the employee stock purchase plan (“ESPP”) using the Black-Scholes pricing model. See “Note 14 – Stock-based Compensation Expense” for additional detail. Performance-based PSU awards will vest if certain employee-specific or company-designated performance targets are achieved. If minimum performance thresholds are achieved, each PSU award will convert into the Company’s common stock at a defined ratio depending on the degree of achievement of the performance target designated by each individual award. If minimum performance thresholds are not achieved, then no shares will be issued. The expected levels of achievement are reassessed over the requisite service periods and, to the extent that the expected levels of achievement change, stock-based compensation is adjusted in the period of change and recorded on the statements of operations and the remaining unrecognized stock-based compensation is recorded over the remaining requisite service period. For market-based PSUs, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition unless it is due to termination. Income Taxes The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments are used in the calculation of tax credits, tax benefits, tax deductions, and in the calculation of certain deferred taxes and tax liabilities. Significant changes to these estimates may result in an increase or decrease to the Company’s tax provision in a subsequent period. The provision for income taxes was comprised of the Company’s current tax liability and changes in deferred income tax assets and liabilities. The calculation of the current tax liability involves dealing with uncertainties in the application of complex tax laws and regulations and in determining the liability for tax positions, if any, taken on the Company’s tax returns in accordance with authoritative guidance on accounting for uncertainty in income taxes. Deferred income taxes are determined based on the differences between the financial reporting and tax basis of assets and liabilities. The Company must assess the likelihood that it will be able to recover the Company’s deferred tax assets. If recovery is not likely on a more-likely-than-not basis, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. However, should there be a change in the Company’s ability to recover its deferred tax assets, the provision for income taxes would fluctuate in the period of such change. See “Note 15 – Income Taxes” for additional detail. F-15 Advertising Costs Advertising costs are expensed as incurred and are presented within selling, general and administrative expense in the Consolidated Statements of Operations. Advertising expenses for the years ended December 31, 2020, 2019 and 2018, were $ 11.4 million, $ 5.0 million and $ 5.0 million, respectively. Indemnification The Company provides indemnification of varying scope to certain customers against claims of intellectual property infringement made by third parties arising from the use of the Company’s technologies. In accordance with authoritative guidance for accounting for guarantees, the Company evaluates estimated losses for such indemnification. The Company considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, no such claims have been filed against the Company and no liability has been recorded in the Company’s financial statements. As permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company believes, given the absence of any such payments in the Company’s history, and the estimated low probability of such payments in the future, that the estimated fair value of these indemnification agreements is immaterial. In addition, the Company maintains a directors’ and officers’ liability insurance policy that is intended to reduce its financial exposure and may enable the Company to recover any payments, should they occur. Contingencies From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. Management reviews these estimates in each accounting period as additional information becomes known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the consolidated financial statements. If a loss is probable but the amount of loss cannot be reasonably estimated, the Company discloses the loss contingency and an estimate of possible loss or range of loss (unless such an estimate cannot be made). The Company does not recognize gain contingencies until they are realized. Legal costs incurred in connection with loss contingencies are expensed as incurred. See “Note 16 – Commitments and Contingencies ,” for further information regarding the Company’s pending litigation. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the related assets’ estimated useful lives: Equipment, furniture and other 1 to 5 years Leasehold improvements Lesser of related lease term or 5 years Building and improvements Up to 30 years Expenditures that materially increase asset life are capitalized, while ordinary maintenance and repairs are expensed as incurred. Foreign Currency Translation The Company predominantly uses the U.S. dollar as its functional currency. Certain non-U.S. subsidiaries designate a local currency as their functional currency. The translation of assets and liabilities into U.S. dollars for subsidiaries with a functional currency other than the U.S. dollar is performed using exchange rates in effect at the balance sheet date. The translation of revenues and expenses into U.S. dollars for subsidiaries with a functional currency other than the U.S. dollar is performed using the average exchange rate for the respective period. Gains or losses from cumulative translation adjustments, net of tax, are included as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. The Company records net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to the functional currency within other income and expense, net. F-16 NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605), and requires entities to recognize revenue when control of goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. On January 1, 2018 , the Company adopted the new standard using the modified retrospective method, under which the Company recorded a $ 224 million cumulative net of tax adjustment to the opening balance of retained earnings on January 1, 2018. The adjustment was determined by measuring the impact of the new standard on existing contracts that were not completed as of December 31, 2017. Prior period comparative information has not been restated and continues to be reported under Topic 605 in effect for those periods. This new standard had a material impact on the Company’s revenue and its consolidated statement of operations and balance sheet as of and for the year ended December 31, 2018, and is expected to have a material impact on an ongoing basis, with no impact on the timing of customer billings or on cash flows. See “Note 4 – Revenue” for further discussion. In February 2016, the FASB issued ASU No. 2016-02, " Leases " (Topic 842), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. On January 1, 2019 , the Company adopted the new standard using the modified retrospective transition approach and elected the transition option , under which the Company initially applied the transition requirements to all leases that existed at December 31, 2018, with any residual effects of initially applying Topic 842 recognized as a cumulative effect adjustment to the opening balance of retained earnings on January 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification. Under the optional transition method, the Company opted to continue to apply the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year it adopted the new leases standard, and therefore did not restate prior period results. The most significant impact from adopting Topic 842 was the initial recognition of operating lease ROU assets and operating lease liabilities of $ 17.6 million and $ 18.8 million, respectively, as of January 1, 2019. Operating lease liabilities consist of both current and noncurrent portions with the current portion included in the balance of accrued liabilities. The standard did not materially impact the Company’s Consolidated Statements of Operations and had no impact on cash flows. In September 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ” (“ASU 2016-13”), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The current expected credit loss model is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability. Current expected credit losses, and subsequent adjustments, represent an estimate of lifetime expected credit losses that are recorded as an allowance deducted from the amortized cost of the financial instrument. The updated guidance also amends the other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments for credit-related losses through an allowance and eliminating the length of time a security has been in an unrealized loss position as a consideration in the determination of whether a credit loss exists. On January 1, 2020 , the Company adopted the new standard using a modified retrospective transition approach for the provisions related to application of the current expected credit loss model to financial instruments and using a prospective transition approach for the provisions related to credit losses on available-for-sale debt securities. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. For additional detail, refer to “Note 4 – Revenue .” In August 2018, the FASB issued ASU 2018-15, “ Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ” (“ASU 2018-15”) modifying the requirements for capitalizing costs incurred to implement a hosting arrangement that is a service contract. The modified requirements were intended to align the cost capitalization requirements for hosting arrangements with the cost capitalization requirements for internal-use software. The Company adopted the standard on January 1, 2020 and applied the modified requirements prospectively to all implementation costs incurred after the date of adoption. The adoption did not have a material impact on the Company’s consolidated financial statements. Recent Accounting Pronouncements F-17 In December 2019, the FASB released ASU 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The purpose of the update is to reduce the complexity pertaining to certain areas in accounting for income taxes. Key amendments from ASU 2019-12 include, but are not limited to, the accounting for hybrid tax regimes, step-up in tax basis for goodwill in non-business combination transactions, intraperiod tax allocation exception to the incremental approach, and interim period accounting for enacted changes in tax law. ASU 2019-12 is effective for the Company in the first quarter of the year ending December 31, 2021. The Company does not expect that the adoption of the standard will have a material impact on its consolidated financial statements . In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective beginning on March 12, 2020 and may be applied prospectively through December 31, 2022. The Company is currently assessing the potential impact of the standard on its consolidated financial statements . NOTE 4 – REVENUE Revenue Recognition General Revenue is recognized when control of the promised goods or services is transferred to a customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services, which may include various combinations of goods and services which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of sales taxes collected from customers which are subsequently remitted to governmental authorities. In situations where foreign withholding taxes are withheld by the Company’s licensee, revenue is recognized gross of withholding taxes that are remitted directly by the licensee to a local tax authority. Arrangements with Multiple Performance Obligations Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are separately accounted for if they are distinct. In an arrangement with multiple performance obligations, the transaction price is allocated among the separate performance obligations on a relative stand-alone selling price basis. The determination of stand-alone selling price considers market conditions, the size and scope of the contract, customer and geographic information, and other factors. When observable prices are not available, stand-alone selling price for separate performance obligations is based on the cost-plus-margin approach, considering overall pricing objectives. The allocation of transaction price among performance obligations in a contract may impact the amount and timing of revenue recognized in the Consolidated Statements of Operations during a given period. Contract Modifications Contracts may be modified due to changes in contract specifications or customer requirements. Contract modifications occur when the change in terms either creates new enforceable rights and obligations or changes existing enforceable rights and obligations. The effect of a contract modification for goods and services that are not distinct in the context of the contract on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. Contract modifications that result in goods or services that are distinct from the existing goods or services are accounted for as separate contracts if they are sold at their stand-alone selling price, or otherwise prospectively. Variable Consideration When a contract with a customer includes a variable transaction price, an estimate of the consideration which the Company expects to be entitled to for transferring the promised goods or services is made at contract inception. Depending on the terms of the contract, variable consideration is estimated using either the expected value approach or the most likely value approach. Under either approach to estimating variable consideration, the estimate considers all information (historical, current and forecast) that is reasonably available at contract inception. The amount of variable consideration is estimated at contract inception and updated as additional information becomes available. The estimate of variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Subsequent changes in the transaction price resulting from changes in the estimate of variable consideration are allocated to the performance obligations in the contract on the same basis F-18 as at contract inception. Certain payments to licensees, retailers and distributors, such as market development funds and revenue shares, are treated as a reduction of the transaction price, and therefore a reduction to revenue, unless the payment is in exchange for a distinct good or service that the licensee, retailer or distributor transfers to the Company. When variable consideration is in the form of a sales-based or usage-based royalty in exchange for a license of IP, or when a license of IP is the predominant item to which the variable consideration relates, revenue is recognized at the later of when the subsequent sale or usage occurs or the performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied or partially satisfied. Nature of Goods and Services The following is a discussion of the principal activities from which the Company generates its revenue. License Agreements The Company operates in two business segments. In its Product segment, the Company licenses its audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions. Within this segment, the Company groups its business into three categories based on the products delivered and customers served: Consumer Experience, Connected Car, and Pay-TV. In its IP Licensing segment, the Company licenses (i) its media patent portfolios (“Media IP licensing”) to multichannel video programming distributors, over-the-top video service providers, consumer electronics manufacturers, social media, and other new media companies and (ii) its semiconductor technologies and associated patent portfolios (“Semiconductor IP licensing”) to memory, sensors, RF component, and foundry companies. The Company licenses its technologies and portfolios under three revenue models: (i) fixed-fee Media IP licensing, (ii) fixed-fee or minimum guarantee Product or Semiconductor IP licensing, and (iii) per-unit or per-subscriber royalty licenses. Fixed-fee Media IP licensing The Company's long-term fixed-fee Media IP licensing agreements, which are related to the TiVo businesses following the Mergers, provide its customers with rights to future patented technologies over the term of the agreement that are highly interdependent or highly interrelated to the patented technologies provided at the inception of the agreement. The Company treats these rights as a single performance obligation with revenue recognized on a straight-line basis over the term of the fixed-fee license agreement. At times, the Company enters into license agreements in which a licensee is released from past patent infringement claims or is granted a license to ship an unlimited number of units or for an unlimited number of subscribers over a future period for a fixed fee. In these arrangements, the Company allocates the transaction price between the release for past patent infringement claims and the future license. In determining the stand-alone selling price of the release for past patent infringement claims and the future license, the Company considers such factors as the number of units shipped in the past or the number of past subscribers and the relevant geographies of the shipped units or subscribers, the future number of subscribers or units, as well as the licensing rate the Company generally receives for per-subscriber or units shipped in the same geographies. As the release from past patent infringement claims is generally satisfied at execution of the agreement, the transaction price allocated to the release from past patent infringement claims is generally recognized in the period the agreement is executed and the amount of transaction price allocated to the future license is recognized ratably over the future license term. Fixed-fee or minimum guarantee Semiconductor IP or Product licensing The Company enters into Semiconductor IP or Product licenses that have fixed fee or minimum guarantee arrangements, whereby licensees pay a fixed fee for the right to incorporate the Company’s technology in the licensee's products over the license term. In arrangements with a minimum guarantee, the fixed fee component corresponds to a minimum number of units or dollars that the customer must produce or pay, with additional per-unit fees for any units or dollars exceeding the minimum. In most cases, the customer pays the fixed license fee in specified installments over the license term. For both fixed fee and minimum guarantee agreements for Semiconductor IP or Product licensing, the Company recognizes the full fixed fee as revenue at the beginning of the license term, when the licensee has the right to use the IP and begins to benefit from the license. If the contract term of a fixed fee or minimum guarantee arrangement is longer than one year, the Company also considers the scheduled payment arrangements to determine whether a significant financing component exists. In general, if the payment arrangements extend beyond the initial twelve months of the contract, the Company treats a portion of the payments as a significant financing component. The discount rate used for each arrangement reflects the rate that would be used in a separate financing transaction between the Company and the licensee at contract inception and takes into account the credit F-19 characteristics of the licensee and market interest rates as of the date of the agreement. As such, the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated financing component. As payments are received from the licensee, the Company recognizes a portion of the financing component as interest income, reported as other income and expense in the Consolidated Statements of Operations. Per-unit or per-subscriber royalty licenses The Company recognizes revenue from per-unit or per-subscriber royalty licenses in the period in which the licensee's sales or production are estimated to have occurred, which results in an adjustment to revenue when actual sales or production are subsequently reported by the licensee, which is generally in the month or quarter following usage or shipment. The Company generally recognizes revenue from royalty licenses on a per-subscriber per-month model for licenses with service providers and a per-unit shipped or manufactured model for licenses with CE manufacturers and memory, sensors, RF component, and foundry companies. Compliance Audits The Company actively monitors and enforces its IP, including seeking appropriate compensation from customers that have under-reported royalties owed under a license agreement and from third parties that utilize the Company’s intellectual property without a license. As a result of these activities, the Company may, from time to time, recognize revenue from payments resulting from periodic compliance audits of licensees for underreporting royalties incurred in prior periods, as part of a settlement of a patent infringement dispute, or from legal judgments in a license dispute. These recoveries and settlements may cause revenue to be higher than expected during a particular reporting period and such recoveries may not occur in subsequent periods. The Company recognizes revenue from recoveries when a binding agreement has been executed and the Company concludes collection under that agreement is likely. Arrangements with Multiple System Operators for the TiVo Service The Company's arrangements with multiple system operators (“MSOs”) typically include software customization and set-up services, associated maintenance and support, limited training, post-contract support, TiVo-enabled DVRs, non-DVR Set-Top Boxes (“STBs”), and the TiVo service. The Company has two types of arrangements with MSOs that include technology deployment and engineering services. In instances where the Company hosts the TiVo service, non-refundable payments received for customization and set-up services are deferred and recognized as revenue ratably over the hosting term. The related cost of such services is capitalized to the extent it is deemed recoverable and amortized to cost of revenue over the same period as the related TiVo service revenue is recognized. The Company estimates the stand-alone selling prices for training, DVRs, non-DVR STBs and maintenance and support based on the price charged in stand-alone sales of the promised good or service. The stand-alone selling price for the TiVo service is determined by considering the size of the MSO and expected volume of deployment, market conditions, competitive landscape, internal costs and total gross margin objectives. For a term license to the TiVo service, the Company receives license fees for the hosted TiVo service on either a per-subscriber per-month basis or a fixed fee. The Company recognizes revenue from per-subscriber per-month licenses during the month the TiVo service is provided to the customer and recognizes revenue from fixed fee licenses ratably over the license period. In arrangements where the Company does not host the TiVo service, which includes engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of the software, the Company recognizes revenue as progress toward completion is made using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Project costs are primarily labor related to specific activities required for the project. Costs related to general infrastructure or uncommitted platform development are not included in the project cost estimates and are expensed as incurred. Estimating project costs requires forecasting costs, tracking progress toward completion and projecting the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement, and revisions to estimates are recognized on a cumulative catch-up basis when the changed conditions become known. Provisions for losses are recorded when estimates indicate it is probable that a loss will be incurred for the contract. The Company generally recognizes revenue from license fees for the TiVo service that the Company does not host on a per-subscriber per-month basis due to the recognition constraint on intellectual property usage-based royalties. Subscription Services Subscription services revenue primarily consists of fees to provide customers with access to one or more of the Company's hosted products such as its iGuide interactive program guide (“IPG”), advanced search and recommendations, metadata and analytics products, including routine customer support. The Company generally receives per-subscriber per-month fees for its F-20 iGuide IPG and search and recommendations service and revenue is recorded in the month the customer uses the service. The Company generally receives a monthly or quarterly fee from its metadata or analytics licenses for the right to use the metadata or access its analytics platform and to receive regular updates. Revenue from the Company's metadata and analytics service is recognized ratably over the subscription period. TiVo-enabled DVRs and non-DVRs, including TiVo Stream 4K, and related TiVo Service The Company sells TiVo-enabled DVRs and non-DVRs and the related service directly to customers through sales programs via the TiVo.com website and licenses the sale of TiVo-enabled DVRs and non-DVRs through a limited number of retailers. All customers have the right to cancel their subscription to the TiVo service within 30 days of subscription activation for a full refund. After the initial subscription period for a DVR, all customers have various pricing options when they renew their subscription. The transaction price allocated to the DVR and non-DVR is recognized as revenue upon shipment to the customer and the transaction price allocated to the TiVo service is recognized as revenue ratably over the service period. Subscription revenue from lifetime subscriptions are recognized ratably over the estimated useful life of the DVR or non-DVR associated with the subscription. The estimated useful life for a DVR and non-DVR depends on a number of assumptions, including, but not limited to, customer retention rates, the timing of new product introductions and historical experience. The Company periodically reassesses the estimated useful life of DVRs and non-DVRs. When the actual useful life of a DVR or a non-DVR materially differs from the Company's estimate, the estimated useful life of the DVR or non-DVR is adjusted, which could result in the recognition of revenue over a longer or shorter period of time. Significant Judgments Determining whether promises to transfer multiple goods and services in contracts with customers are considered distinct performance obligations that should be accounted for separately requires significant judgment, including related to the level of integration and interdependency between the performance obligations. In addition, judgment is necessary to allocate the transaction price to the distinct performance obligations, including whether there is a discount or significant financing component to be allocated based on the relative stand-alone selling price of the various performance obligations. Significant judgment is required to determine the stand-alone selling price for each distinct performance obligation when an observable price is not available. In instances where stand-alone selling price is not directly observable, such as when the Company does not sell the good or service separately, the stand-alone selling price is determined using a range of inputs that includes market conditions and other observable inputs. More than one stand-alone selling price may exist for individual goods and services due to the stratification of those goods and services, considering attributes such as the size of the customer and geographic region. Due to the nature of the work required to be performed on some performance obligations, significant judgment may be required to determine the transaction price. It is common for the Company's license agreements to contain provisions that can either increase or decrease the transaction price. These variable amounts are generally estimated based on usage. In addition to estimating variable consideration, significant judgment is necessary to identify forms of variable consideration, determine whether the variable consideration relates to a sales-based or usage-based royalty of intellectual property and determine whether, and when to include estimates of variable consideration in the transaction price. For certain licensees, royalty revenue is generated based on a licensee’s production or shipment of licensed products incorporating the Company’s intellectual property, technologies or software. Licensees with a per-unit or per-subscriber arrangement pay a per-unit royalty for each product manufactured or sold, or for each subscriber, as set forth in its license agreement. Licensees generally report manufacturing, sales or subscriber information in the month or quarter subsequent to when the production, shipment or subscription activity takes place. The Company estimates the royalties earned each quarter based on its forecast of manufacturing and sales activity by its licensees in that quarter. Any differences between actual royalties owed by a licensee and the Company’s estimate are recognized when the licensee’s royalty report is received. Estimating licensees’ quarterly royalties prior to receiving the royalty reports requires the Company to make significant assumptions and judgments related to forecasted trends and growth rates used to estimate quantities manufactured, shipped or subscribed by licensees, which could have a material impact on the amount of revenue recognized. Some hardware products are sold with a right of return and, in certain circumstances, credits or incentives may be provided to customers or resellers at the time of sale. Such credits and incentives are accounted for as variable consideration and recognized as a reduction to revenue. Estimates of returns, credits and incentives are made at contract inception and updated each reporting period. F-21 In contracts where the Company does not host the TiVo service and that include engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of software, or where the Company provides non-recurring engineering (“NRE”) services, the Company recognizes revenue as progress toward completion occurs using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Significant judgment is required to estimate the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement. Management evaluates its estimates, inputs and assumptions related to revenue recognition on an ongoing basis. The use of different estimates, inputs or assumptions may materially affect the reported amounts of assets and liabilities as of the date of the financial statements and the results of operations for the reporting period. Practical Expedients and Exemptions The Company applies a practical expedient to not perform an evaluation of whether a contract includes a significant financing component when the timing of revenue recognition differs from the timing of cash collection by one year or less. The Company applies a practical expedient to expense costs to obtain a contract with a customer as incurred as a component of selling, general and administrative expenses when the amortization period would have been one year or less. The Company applies a practical expedient when disclosing revenue expected to be recognized from unsatisfied performance obligations to exclude contracts with customers with an original duration of less than one year ; contracts for which revenue is recognized based on the amount which the Company has the right to invoice for services performed and amounts attributable to variable consideration arising from (i) a sales-based or usage-based royalty of an intellectual property license or (ii) when variable consideration is allocated entirely to a wholly unsatisfied performance obligation; or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation. Revenue Details The following information depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors by disaggregating revenue by product category/end market and geographic location (presented in “Note 17 - Segment and Geographic Information ”). This information includes revenue recognized from contracts with customers and revenue from other sources, including past royalty revenues. Revenue disaggregated by product category/end market was as follows (in thousands): Years Ended December 31, 2020 2019 2018 Consumer Experience $ 173,719 $ 116,130 $ 135,354 Pay-TV 131,920 — — Connected Car 70,462 81,994 82,995 Product revenue 376,101 198,124 218,349 IP Licensing revenue 515,919 81,943 187,784 Total revenue $ 892,020 $ 280,067 $ 406,133 Contract Balances Contracts Assets Contract assets primarily consist of unbilled contracts receivable that are expected to be received from customers in future periods, where the revenue recognized to date (or cumulative adjustments to retained earnings in the initial period of adopting Topic 606) exceeds the amount billed. The amount of unbilled contracts receivable may not exceed their net realizable value and are classified as long-term assets if the payments are expected to be received more than one year from the reporting date. Contract assets also include the incremental costs of obtaining a contract with a customer, principally sales commissions when the renewal commission is not commensurate with the initial commission, and deferred engineering costs for significant software customization or modification and set-up services to the extent deemed recoverable. F-22 Contract assets were recorded in the Consolidated Balance Sheets as follows (in thousands): December 31, 2020 December 31, 2019 Unbilled contracts receivable $ 132,431 $ 121,826 Other current assets 1,208 — Long-term unbilled contracts receivable $ 6,761 26,672 Other long-term assets 2,591 — Total contract assets $ 142,991 $ 148,498 Contract Liabilities Contract liabilities are mainly comprised of deferred revenue related to consumer lifetime subscriptions for the TiVo service, multi-period licensing or cloud-based services, and other offerings for which the Company is paid in advance while the promised good or service is transferred to the customer at a future date or over time. Deferred revenue also includes amounts received related to professional services to be performed in the future. Deferred revenue arises when cash payments are received, including amounts which are refundable, in advance of performance obligations being completed. Allowance for Credit Losses The allowance for credit losses, which includes the allowance for accounts receivable and unbilled contracts receivable, represents the Company’s best estimate of lifetime expected credit losses inherent in those financial assets. The Company’s lifetime expected credit losses are determined using relevant information about past events (including historical experience), current conditions, and reasonable and supportable forecasts that affect collectability. The Company monitors its credit exposure through ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. In addition, the Company performs routine credit management activities such as timely account reconciliations, dispute resolution, and payment confirmations. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The Company’s long-term unbilled contracts receivable is derived from fixed-fee or minimum-guarantee Semiconductor IP or Product licensing arrangements, primarily with large well-capitalized companies. It is considered to be of high credit quality due to past collection history and the nature of the customers. The following table presents the activity in the allowance for credit losses for the year ended December 31, 2020, 2019 and 2018 (in thousands): Years Ended December 31, 2020 2019 2018 Accounts Receivable Unbilled Contracts Receivable Accounts Receivable Unbilled Contracts Receivable Accounts Receivable Unbilled Contracts Receivable Beginning balance $ 566 $ — $ 779 $ — $ 1,181 $ — Provision for credit losses 7,418 * 2,231 * ( 74 ) — 417 — Recoveries/charged-off ( 648 ) — ( 139 ) — ( 819 ) — Balance at end of period $ 7,336 $ 2,231 $ 566 $ — $ 779 $ — * The increase in provision for credit losses was based on assessment of current conditions including the COVID-19 pandemic and anticipation of delayed or delinquent payments on existing accounts receivable as a result of the declining financial health and liquidity positions of certain of the Company’s customers, as well as U.S. restrictions on trade with certain Chinese customers, and certain late payments and collection related issues. F-23 Additional Disclosures The following table presents additional revenue and contract disclosures (in thousands): Years Ended December 31, 2020 2019 2018 Revenue recognized in the period from: Amounts included in deferred revenue at the beginning of the period $ 720 $ 3,130 $ 2,347 Amounts included in deferred revenue acquired from the Mergers $ 20,271 $ — $ — Performance obligations satisfied in previous periods (true ups, licensee reporting adjustments and settlements) (1) $ 296,031 (2) $ 2,935 $ 1,323 (1) True ups represent the differences between the Company’s quarterly estimates of per-unit royalty revenue and actual production/sales-based royalties reported by licensees in the following period. Licensee reporting adjustments represent corrections or revisions to previously reported per-unit royalties by licensees, generally resulting from the Company’s inquiries or compliance audits. Settlements represent resolutions of litigation during the period for past royalties owed pursuant to expired or terminated IP license agreements. (2) Includes past royalty revenue from Comcast Corporation (“Comcast”). On November 9, 2020, the Company entered into a patent license agreement (the “Agreement”) with Comcast and the Company resolved all of the outstanding litigation with Comcast. The Agreement is effective as of the expiration of Comcast’s prior agreement in 2016 and its term continues into 2031. In connection with the Agreement, the Company recorded revenue from past royalties in the fourth quarter of 2020 and expects to record revenue from the prospective license into 2031 . Remaining revenue under contracts with performance obligations represents the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) under the Company’s fixed-fee IP, software-as-a-service agreements and engineering services contracts. The Company’s remaining revenue under contracts with performance obligations was as follows (in thousands): December 31, 2020 2019 Revenue from contracts with performance obligations expected to be satisfied in: 2021 $ 152,008 $ 5,337 2022 102,764 990 2023 91,636 345 2024 77,989 — 2025 76,028 — Thereafter 429 — Total $ 500,854 $ 6,672 NOTE 5 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS Other current assets consisted of the following (in thousands): December 31, 2020 2019 Prepaid income taxes $ 4,654 $ 2,364 Prepaid expenses 20,393 8,802 Inventory 9,819 100 Other 5,897 2,469 $ 40,763 $ 13,735 F-24 Property and equipment, net consisted of the following (in thousands): December 31, 2020 2019 Equipment, furniture and other $ 61,573 $ 32,504 Building and improvements 18,309 18,258 Land 5,300 5,300 Leasehold improvements 25,776 8,103 110,958 64,165 Less: Accumulated depreciation and amortization ( 47,751 ) ( 31,288 ) $ 63,207 $ 32,877 Other long-term assets consisted of the following (in thousands): December 31, 2020 2019 Long-term deferred tax assets $ 7,042 $ 3,660 Non-current income tax receivable (1) 122,993 64,570 Other assets 23,235 3,106 $ 153,270 $ 71,336 (1) See “Note 15 - Income Taxes ” for detailed information concerning the year-over-year changes. Accrued liabilities consisted of the following (in thousands): December 31, 2020 2019 Employee compensation and benefits $ 55,449 $ 18,404 Third-party royalties 5,906 6,165 Accrued expenses 24,809 7,930 Accrued severance 5,332 — Current portion of operating lease liabilities 17,893 5,845 Other 19,646 3,089 $ 129,035 $ 41,433 Other long-term liabilities consisted of the following (in thousands): December 31, 2020 2019 Long-term income tax payable $ 94,397 $ 76,767 Other 4,556 131 $ 98,953 $ 76,898 Accumulated other comprehensive income (loss) consisted of the following (in thousands): December 31, 2020 2019 Unrealized gain (loss) on available-for-sale debt securities, net of tax $ ( 81 ) $ ( 53 ) Foreign currency translation adjustment, net of tax 1,345 — $ 1,264 $ ( 53 ) F-25 Other income and expense, net, consisted of the following (in thousands): Years Ended December 31, 2020 2019 2018 Interest income from significant financing components $ 2,702 $ 5,762 $ 7,672 Interest income from investments 1,338 2,359 1,074 Realized and unrealized gain (loss) on marketable equity securities ( 707 ) 10 ( 2,217 ) Other income 1,122 897 2,066 $ 4,455 $ 9,028 $ 8,595 NOTE 6 – FINANCIAL INSTRUMENTS The Company has investments in debt securities which include corporate bonds and notes, treasury and agency notes and bills, commercial paper, certificates of deposit, and in equity securities consisting of money market funds. The Company classifies its debt securities as available-for-sale (“AFS”), which are accounted for at fair value with credit related losses recognized as a provision for credit losses in its Consolidated Statements of Operations and all non-credit related unrealized gains and losses recognized in accumulated other comprehensive income or loss on the Consolidated Balance Sheets. Under ASU 2016-01 (Topic 321), equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, in the Consolidated Statements of Operations. The following is a summary of marketable securities at December 31, 2020 and December 31, 2019 (in thousands): December 31, 2020 Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 69,973 $ 29 $ ( 42 ) $ — $ 69,960 Commercial paper 15,991 — ( 4 ) — 15,987 Treasury and agency notes and bills 32,299 — — — 32,299 Total debt securities 118,263 29 ( 46 ) — 118,246 Money market funds 3,849 — — — 3,849 Total equity securities 3,849 — — — 3,849 Total marketable securities $ 122,112 $ 29 $ ( 46 ) $ — $ 122,095 Reported in: Cash and cash equivalents $ 35,148 Available-for-sale debt securities (1) 86,947 Total marketable securities $ 122,095 (1) Amortized cost related to the balance reported as AFS debt securities was $ 86,963 . F-26 December 31, 2019 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 41,730 $ 29 $ ( 13 ) $ 41,746 Commercial paper 4,052 4 — 4,056 Total debt securities 45,782 33 ( 13 ) 45,802 Money market funds 2,601 — — 2,601 Marketable equity securities 3,405 — ( 2,281 ) 1,124 Total equity securities 6,006 — ( 2,281 ) 3,725 Total marketable securities $ 51,788 $ 33 $ ( 2,294 ) $ 49,527 Reported in: Cash and cash equivalents $ 2,601 Available-for-sale debt securities 45,802 Equity securities 1,124 Total marketable securities $ 49,527 At December 31, 2020 and December 31, 2019, the Company had $ 257.1 million and $ 121.5 million, respectively, in cash, cash equivalents and short-term investments. A significant portion of these amounts was held in marketable securities, as shown above. The remaining balance of $ 135.0 million and $ 72.0 million at December 31, 2020 and December 31, 2019, respectively, was cash held in operating accounts not included in the tables above. Debt Securities The gross realized gains and losses on sales of marketable debt securities were not significant during the years ended December 31, 2020, 2019 and 2018. Unrealized losses on AFS debt securities were $ 0.1 million and $ 0.1 million, net of tax, as of December 31, 2020 and December 31, 2019, respectively. The Company evaluated whether the decline in fair value has resulted from credit losses or other factors and concluded these amounts were related to temporary fluctuations in value of AFS securities and were due primarily to changes in interest rates and market conditions of the underlying securities. In addition, the contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. The Company does not intend to sell the debt securities and it is more-likely-than-not that it will not be required to sell the investments before recovery of their amortized cost bases. The Company did no t recognize a provision for credit loss expense related to its AFS debt securities for the year ended December 31, 2020. No impairment charges were recorded on the AFS debt securities for the years ended December 31, 2019 and 2018, respectively. The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at December 31, 2020 and 2019, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands): December 31, 2020 Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate bonds and notes $ 53,137 $ ( 42 ) $ — $ — $ 53,137 $ ( 42 ) Commercial paper 12,988 ( 4 ) — — 12,988 ( 4 ) Total $ 66,125 $ ( 46 ) $ — $ — $ 66,125 $ ( 46 ) December 31, 2019 Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate bonds and notes $ 20,031 $ ( 10 ) $ 8,753 $ ( 3 ) $ 28,784 $ ( 13 ) Total $ 20,031 $ ( 10 ) $ 8,753 $ ( 3 ) $ 28,784 $ ( 13 ) F-27 The estimated fair value of marketable debt securities by contractual maturity at December 31, 2020 is shown below (in thousands). Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. Estimated Fair Value Due in one year or less $ 77,263 Due in one to two years 40,983 Due in two to three years — Total $ 118,246 Equity Securities On September 19, 2018, the Company purchased seven million common shares of Onkyo Corporation (“Onkyo”), a publicly traded Japanese company and a long-standing customer of the Company, pursuant to the Capital Alliance Agreement (“Agreement”) entered into between the two parties on September 3, 2018. Upon making the investment, the Company held a 6.3 % ownership interest in Onkyo. Due to changes in business expectations, the Company determined not to continue discussions on the business alliance. In July 2019, the Company sold approximately 2.8 million shares of Onkyo stock, for which a realized gain of $ 0.9 million was recognized for the year ended December 31, 2019. In June 2020, the Company sold the remaining 4.2 million shares of Onkyo stock, for which a realized loss of $ 0.7 million was recognized for the year ended December 31, 2020. There were no sales of the Onkyo investment in 2018, during which period an unrealized loss of $2.2 million was recognized. Non-marketable Equity Securities Investments in non-marketable equity securities are accounted for using either the equity method or the cost method. Investments in entities over which the Company has the ability to exercise significant influence, but does not hold a controlling interest, are accounted for using the equity method. Under the equity method, the Company records its proportionate share of income or loss in other income and expense, net, in the Consolidated Statements of Operations. Investments in entities over which the Company does not have the ability to exercise significant influence are accounted for using the cost method. The Company monitors its non-marketable securities portfolio for potential impairment. When the carrying amount of an investment in a non-marketable security exceeds its fair value and the decline in fair value is determined to be other-than-temporary, the loss is recorded in other income and expense, net, in the Consolidated Statements of Operations. Upon merging with TiVo on June 1, 2020, the Company assumed certain investments in non-marketable equity. As of December 31, 2020, other long-term assets included equity securities accounted for under the equity method with a carrying amount of $ 4.2 million and equity securities without a readily determinable fair value with a carrying amount of $ 0.1 million, respectively. No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the year ended December 31, 2020. The Company had no investments in non-marketable equity as of December 31, 2019. Derivatives In the first quarter of 2019 , the Company began to use derivative financial instruments to manage foreign currency exchange rate risk. The Company does not enter into derivative transactions for trading purposes. Cash flows from the derivative programs are classified as cash flows from operating activities in the Consolidated Statement s of Cash Flows . The Company’s derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts, which are used primarily to hedge balance sheet and certain expenditure exposures. These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates. Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements. All significant inputs to the third-party valuation models are observable in active markets. Inputs include current market-based parameters such as forward rates, yield curves and credit default swap pricing. For additional information related to the three-level hierarchy of fair value measurements, s ee “ Note 7 – Fair Value.” F-28 Under the Company’s policy election, these derivatives are not designated as hedge instruments, and are measured and reported at fair value. Changes in the fair value of these undesignated derivatives are reported in other income and expense, net, on the Consolidated Statements of Operations. Realized gains or losses were not significant in the year s ended December 31, 2020 and 2019 , respectively . There were no derivative instruments outstanding as of December 31, 2020 and 2019 , respectively . The Company did no t engage in derivative contracts in 2018 . NOTE 7 – FAIR VALUE The Company follows the authoritative guidance for fair value measurement and the fair value option for financial assets and financial liabilities. The Company carries its financial instruments at fair value with the exception of its long-term debt. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets. Level 2 Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. When applying fair value principles in the valuation of assets, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculates the fair value of its Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs. There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2019 and December 31, 2020. The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of December 31, 2020 (in thousands): Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Marketable securities Money market funds - equity securities (1) $ 3,849 $ 3,849 $ — $ — Corporate bonds and notes - debt securities (2) 69,960 — 69,960 — Treasury and agency notes and bills - debt securities (3) 32,299 — 32,299 — Commercial paper - debt securities (3) 15,987 — 15,987 — Total Assets $ 122,095 $ 3,849 $ 118,246 $ — (1) Reported as cash and cash equivalents in the Consolidated Balance Sheet. (2) Reported as AFS debt securities in the Consolidated Balance Sheet. (3) Reported as cash and cash equivalents if purchased with an original maturity of three months or less at the date of purchase; otherwise reported as AFS debt securities in the Consolidated Balance Sheet. F-29 The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of December 31, 201 9 (in thousands): Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Marketable securities Money market funds - equity securities (1) $ 2,601 $ 2,601 $ — $ — Marketable equity securities (2) 1,124 1,124 — — Corporate bonds and notes - debt securities (3) 41,746 — 41,746 — Commercial paper - debt securities (3) 4,056 — 4,056 — Total Assets $ 49,527 $ 3,725 $ 45,802 $ — (1) Reported as cash and cash equivalents in the Consolidated Balance Sheet. (2) Reported as equity securities in the Consolidated Balance Sheet. (3) Reported as AFS debt securities in the Consolidated Balance Sheet. Financial Instruments Not Recorded at Fair Value The Company’s long-term debt is carried at amortized cost and is measured at fair value on a quarterly basis for disclosure purposes. The carrying amounts and estimated fair values are as follows (in thousands): December 31, 2020 December 31, 2019 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value 2020 Term B Loan Facility (1) $ 839,302 $ 842,579 $ — $ — 2021 Convertible Notes 48 48 — — 2018 Amended Term B Loan (1) — — 334,679 335,642 Total long-term debt, net $ 839,350 $ 842,627 $ 334,679 $ 335,642 (1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 34.4 million and $ 9.3 million as of December 31, 2020 and 2019, respectively. See “Note 11 – Debt ” for additional information. If reported at fair value in the Consolidated Balance Sheets, the Company’s debt would be classified within Level 2 of the fair value hierarchy. The fair value of the debt was estimated based on the quoted market prices for the same or similar issues . Non-Recurring Fair Value Measurements For purchase accounting related fair value measurements, see “Note 9 – Business Combination.” NOTE 8 - LEASES Under Topic 842, a contract is a lease, or contains a lease, if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, an entity shall assess whether, throughout the period of use, the entity has both of the following: (a) the right to obtain substantially all of the economic benefits from use of the identified asset; and (b) the right to direct the use of the identified asset. The Company leases office and research facilities, data centers and office equipment under operating leases which expire through 2029. The Company’s leases have remaining lease terms of one year to nine years , some of which may include options to extend the leases for five years or longer, and some of which may include options to terminate the leases within the next 6 years or less. Leases with an initial term of 12 months or less are not recorded on the balance sheets ; expense for these leases is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred and are not included within the lease liability and right-of-use assets calculation. As a practical expedient, the Company elected, for all office and F-30 facility leases, not to separate nonlease components (e.g., common-area maintenance costs) from lease components (e.g., fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component. As most of the leases do not provide an implicit rate, the Company generally, for purposes of discounting lease payments, uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The Company subleases certain real estate to third parties. The sublease portfolio consists of operating leases for previously exited office space. Certain subleases include variable payments for operating costs. The subleases are generally co-terminus with the head lease, or shorter. Subleases do not include any residual value guarantees or restrictions or covenants imposed by the leases. Income from subleases is recognized as a reduction to selling, general and administrative expenses. The components of operating lease costs were as follows (in thousands): Years Ended December 31, 2020 2019 2018 Fixed lease cost (1) $ 17,407 $ 6,876 $ 7,188 Variable lease cost 3,648 1,095 — Less: sublease income ( 5,423 ) — — Total operating lease cost $ 15,632 $ 7,971 $ 7,188 (1) Includes short-term leases costs, which were immaterial. Other information related to leases was as follows (in thousands, except lease term and discount rate): Years Ended December 31, 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 16,770 $ 6,183 ROU assets obtained in exchange for new lease liabilities: Operating leases $ 5,775 $ 5,612 December 31, 2020 December 31, 2019 Weighted-average remaining lease term (years): Operating leases 5.1 4.6 Weighted-average discount rate: Operating leases 5.2 % 5.7 % Future minimum lease payments and related lease liabilities as of December 31, 2020 were as follows (in thousands): Operating Lease Payments (1) Sublease Income Net Operating Lease Payments 2021 $ 21,825 $ ( 6,257 ) $ 15,568 2022 18,420 ( 6,117 ) 12,303 2023 16,776 ( 6,231 ) 10,545 2024 15,719 ( 6,293 ) 9,426 2025 14,635 ( 6,279 ) 8,356 Thereafter 8,966 ( 935 ) 8,031 Total lease payments 96,341 ( 32,112 ) 64,229 Less: imputed interest ( 12,205 ) — ( 12,205 ) Present value of lease liabilities: $ 84,136 $ ( 32,112 ) $ 52,024 Less: current obligations under leases (accrued liabilities) 17,893 Noncurrent operating lease liabilities $ 66,243 F-31 (1) Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes. As of December 31, 2019, future minimum lease payments were as follows (in thousands): Operating Leases 2020 $ 6,387 2021 4,558 2022 3,259 2023 3,235 2024 2,619 Thereafter 1,977 Total lease payments 22,035 Less: imputed interest ( 2,776 ) Present value of lease liabilities $ 19,259 Less: current obligations under leases (accrued liabilities) 5,845 Noncurrent operating lease liabilities $ 13,414 NOTE 9 – BUSINESS COMBINATION Effective June 1, 2020 , Xperi and TiVo completed the previously announced merger of equals transaction (the “Merger”) contemplated by the Agreement and Plan of Merger and Reorganization, dated as of December 18, 2019 , as amended on January 31, 2020 , (the “Merger Agreement”), by and among Xperi, TiVo, XRAY-TWOLF HoldCo Corporation (“Xperi Holding”), XRAY Merger Sub Corporation (“Xperi Merger Sub”) and TWOLF Merger Sub Corporation (“TiVo Merger Sub”). Immediately prior to the consummation of the Merger, Xperi Holding changed its name to “Xperi Holding Corporation” (the “Company”). Pursuant to the Merger Agreement, (i) Xperi Merger Sub was merged with and into Xperi, with Xperi surviving the merger as a subsidiary of Xperi Holding Corporation (the “Xperi Merger”) and (ii) TiVo Merger Sub was merged with and into TiVo, with TiVo surviving the merger as a subsidiary of Xperi Holding Corporation (the “TiVo Merger” and together with the Xperi Merger, the “Mergers”). Immediately following the consummation of the Mergers, each of Xperi and TiVo became wholly-owned subsidiaries of the Company. Upon completion of the Xperi Merger, each share of common stock, par value $ 0.001 per share, of Xperi (the “Xperi Common Stock”) (excluding any shares of Xperi Common Stock that were held in treasury immediately prior to the effective time of the Xperi Merger, which were automatically canceled and retired for no consideration) was converted into the right to receive one fully paid and non-assessable share of common stock, par value $ 0.001 per share, of the Company (“Company Common Stock”). Upon completion of the TiVo Merger, (i) each share of common stock, par value $ 0.001 per share, of TiVo (the “TiVo Common Stock”) (excluding any shares of TiVo Common Stock that were held in treasury immediately prior to the effective time of the TiVo Merger, which were automatically canceled and retired for no consideration) was converted into the right to receive 0.455 fully paid and non-assessable shares of common stock of the Company (the “Exchange Ratio”), in addition to cash in lieu of any fractional shares of the Company Common Stock. As provided in the Merger Agreement, at the effective time of the Mergers, (i) all options, restricted shares, restricted stock unit awards and other equity awards relating to shares of Xperi Common Stock outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options, restricted shares, restricted stock unit awards and other equity awards, respectively, relating to shares of Company Common Stock after giving effect to appropriate adjustments to reflect the Mergers and otherwise generally on the same terms and conditions as applied under the applicable plans and award agreements immediately prior to the effective time of the Mergers, and (ii) all options, restricted shares, restricted stock unit awards and other equity awards relating to shares of TiVo Common Stock that were outstanding immediately prior to the effective time of the Mergers (including Exchange Ratio) were generally automatically converted into options, restricted stock unit awards, restricted shares and other equity awards, respectively, relating to shares of Company Common Stock after giving effect to appropriate adjustments to reflect the Mergers and otherwise generally on the same terms and conditions as applied under the applicable plans and award agreements immediately prior to the effective time of the Mergers. Following the Mergers, Xperi Common Stock and TiVo Common Stock were delisted from the Nasdaq Global Select Market (“Nasdaq”) and deregistered under the Securities Exchange Act of 1934, as amended. Since June 2, 2020, the shares of the Company’s common stock have been listed for trading on Nasdaq under the ticker symbol “XPER.” F-32 The Mergers created a leading consumer and entertainment product/solutions and IP licensing company. The Company’s IP business includes one of the industry’s largest and most successful IP portfolios licensed to a diverse base of customers. On the product side, the Company offers a seamless end-to-end entertainment experience from creation to consumption; with greater scale, technology depth and breadth, and a platform relevant to one of the biggest challenges consumers of entertainment face today – how to quickly and easily find, watch and enjoy entertainment . The Company is currently contemplating and may pursue, subject to any required regulatory approvals, a separation of the Company’s product business and IP licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies. The Company is currently evaluating the optimal timing of the contemplated business separation. Merger Consideration The merger consideration of $ 828.3 million was calculated as follows (amounts in thousands except exchange ratio and share price): TiVo common shares outstanding as of June 1, 2020 128,132 TiVo exchange ratio 0.455 Xperi Holding Corporation common stock issued in exchange 58,300 Xperi Common Stock closing share price on June 1, 2020 $ 14.00 $ 816,201 Fair value of replaced TiVo equity awards relating to pre-acquisition vesting of the equity award holders’ requisite service periods 12,133 Total merger consideration $ 828,334 Assumed TiVo Equity Awards In connection with the Mergers, the Company assumed unvested TiVo equity incentive awards with a fair value of $ 34.1 million, of which $ 12.1 million related to pre-acquisition services and was included in the purchase price, and $ 22.0 million related to post-acquisition services. The Company valued the restricted stock units at the Company’s closing stock price and stock options using a Black-Scholes pricing model as of the date of acquisition. The fair value relating to post-acquisition services was expected to be amortized as stock-based compensation expense over an estimated weighted average remaining service period of 2.5 years after the Mergers. Purchase Price Allocation Based on an evaluation of the provisions of ASC 805, “Business Combinations,” Xperi was determined to be the accounting acquirer in the Mergers. The Company has applied the acquisition method of accounting that requires, among other things, that identifiable assets acquired and liabilities assumed generally be recognized on the balance sheet at fair value as of the acquisition date. In determining the fair value, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows (including revenue, operating expenses, and working capital), discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined by taking into account historical data (supplemented by current and anticipated market conditions) and growth rates. The initial allocation of the purchase price was based on preliminary valuations and assumptions. During the fourth quarter of 2020, the Company recorded certain measurement period adjustments shown below. F-33 The table below presents the estimated fair value that was allocated to TiVo’s assets and liabilities based upon fair values as determined by the Company ($ in thousands ): Estimated Useful Life (years) Preliminary Fair Value (1) Measurement Period Adjustments (2) Adjusted Fair Value Cash and cash equivalents $ 117,424 $ — $ 117,424 Accounts receivable 105,778 105,778 Unbilled contracts receivable 69,058 69,058 Other current assets 21,690 233 21,923 Long-term unbilled contracts receivable 129 129 Property and equipment 41,307 41,307 Operating lease right-of-use assets 71,444 71,444 Identifiable intangible assets: Patents 10 457,400 Customer contracts and related relationships 4-9 358,200 Developed technology 5 34,800 Content database 9 6,200 Trademarks and tradenames N/A 21,400 Total identifiable intangible assets 878,000 878,000 Goodwill 461,129 116 461,245 Other long-term assets 43,700 ( 141 ) 43,559 Accounts payable ( 13,258 ) ( 13,258 ) Accrued legal fees ( 5,619 ) ( 5,619 ) Accrued liabilities ( 79,071 ) ( 530 ) ( 79,601 ) Current portion of deferred revenue ( 29,291 ) ( 29,291 ) Current portion of long-term debt ( 734,609 ) ( 734,609 ) Deferred revenue, less current portion ( 24,319 ) ( 24,319 ) Long-term deferred tax liabilities ( 27,949 ) 421 ( 27,528 ) Long-term debt ( 48 ) ( 48 ) Noncurrent operating lease liabilities ( 59,291 ) ( 59,291 ) Other long-term liabilities ( 7,870 ) ( 99 ) ( 7,969 ) Total purchase price $ 828,334 $ — $ 828,334 (1) As previously reported in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020. (2) All adjustments were recorded in the fourth quarter of 2020. These measurement period adjustments primarily related to current indirect taxes payable, current and non-current income taxes receivable and payable, and deferred taxes as additional information was received and tax returns were finalized. All measurement period adjustments were offset against goodwill. The above allocation of the purchase price is provisional and is still subject to change within the measurement period, including potential adjustments to current indirect taxes payable as additional information is received. The final allocation of the purchase price is expected to be completed as soon as practicable, but no later than one year from the date of the Mergers. The following is a description of the methods used to determine the fair values of significant assets and liabilities. Identifiable Intangible Assets Identifiable intangible assets primarily consist of patents, developed technology, customer relationships, trademarks and tradenames, and content database. In determining the fair value, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined using historical data supplemented by current and anticipated market conditions, and growth rates. Customer contracts and relationships relating to the IP business segment were valued using a “with and without” method. Significant assumptions used in this discounted cash flow analysis are the revenue growth rate, cost of sales, and the discount rate. Patents and other customer contracts and relationships relating to the Product business segment were valued using an excess earnings method. Significant assumptions used in the discounted cash flow analysis for (i) other customer contracts and relationships were the revenue growth rate, EBITDA margins, and the discount rate and (ii) patents were the revenue growth rate, EBITDA margins, and the discount rate. Trademark and tradename, F-34 developed technology, and content database intangible assets were valued using a relief-from-royalty method . T he significant assumptions used in the discounted cash flow analysis for (i) trademarks and tradenames were the royalty rates, revenue growth rates, and discount rate, and (ii) developed technology and content database were the royalty rates . Long-term Debt On the Merger date, TiVo had outstanding debt under the 2019 Term Loan Facility Agreement (“TiVo 2019 Term Loan”), pursuant to which TiVo was required to pay a 3.0 % prepayment premium if the loan was prepaid on or prior to November 22, 2020. Under the 2019 Term Loan Facility Agreement, the Mergers triggered certain change of control conditions that constitute an event of default, thus requiring the debt to be paid immediately following the consummation of the Mergers. In connection with the consummation of the Mergers, the Company, on June 1, 2020, paid the full amount of the outstanding loan balance, including the 3.0 % prepayment penalty. See “Note 11 – Debt” for additional information. Fair value of the TiVo 2019 Term Loan was measured based on the par value of principal outstanding plus prepayment premium, which is equal to the amount that was paid by Xperi immediately following the consummation of the Mergers. The fair value of the TiVo 2019 Term Loan would be classified in Level 2 of the fair value hierarchy. Goodwill The excess of the consideration transferred over the fair value of assets acquired and liabilities assumed was recognized as goodwill. The goodwill is generated from operational synergies and cost savings the Company expects to achieve from the combined operations, as well as the expected benefits from future technologies that do not meet the definition of an identifiable intangible asset and TiVo’s knowledgeable and experienced workforce. See Note 10 for the allocation of goodwill to the reportable segments. Of the total goodwill acquired, $ 14.1 million is expected to be deductible for tax purposes; the remainder of the goodwill is not expected to be deductible for tax purposes. TiVo Results of Operations TiVo’s results of operations and cash flows have been included in the Company’s consolidated financial statements for periods subsequent to June 1, 2020, and TiVo’s assets and liabilities were recorded at their estimated fair values in the Company’s Consolidated Balance Sheets as of June 1, 2020. For the year ended December 31, 2020, TiVo contributed $ 593.6 million of revenue and $ 263.8 million of operating income, respectively, to the operating results of the Company. Transaction and Severance Costs In connection with the Mergers, the Company incurred, during the year ended December 31, 2020, significant one-time expenses such as transaction related costs (e.g. bankers fees, legal fees, consultant fees, etc.), lease impairment charges due to facilities consolidation, severance and retention costs (including stock-based compensation expense resulting from the contractually-required acceleration of equity instruments for departing executives). Total transaction related costs and lease impairment charges were $ 29.4 million and $ 2.4 million, respectively, in 2020. In addition, post-merger severance and retention costs (including related stock-based compensation expense) amounted to $ 14.3 million in 2020. The Company may incur additional expenses for integration, severance and retention, and the impairment of right-of-use assets due to facilities consolidation in future periods. Supplemental Pro Forma Information The following unaudited pro forma financial information assumes the companies were combined as of January 1, 2019. The unaudited pro forma financial information as presented below is for informational purposes only and is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information. This is not necessarily indicative of the results of operations that would have been achieved if the Mergers had taken place on January 1, 2019, nor is it necessarily indicative of future results. Consequently, actual results could differ materially from the unaudited pro forma financial information presented below. The following table presents the pro forma operating results as if TiVo had been included in the Company's Consolidated Statements of Operations as of January 1, 2019 (unaudited, in thousands): Years Ended December 31, 2020 2019 Revenue $ 1,142,603 $ 941,005 Net income (loss) attributable to Xperi Holding Corporation $ 9,775 $ ( 562,153 ) F-35 The unaudited supplemental pro forma information above includes the estimated impact of purchase accounting and other material, nonrecurring adjustments directly attributable to the Mergers. These pro forma adjustments primarily include the following (in thousands): Years Ended December 31, 2020 2019 Estimated increase (decrease) to earnings due to revenue adjustments resulting from purchase accounting $ ( 4,823 ) $ ( 7,191 ) Estimated increase (decrease) to earnings to adjust for transaction and other related costs, including facilities impairment charges, incurred in connection with the Mergers $ 34,569 $ ( 24,651 ) Estimated increase (decrease) to earnings to adjust for severance and retention costs, including related stock-based compensation expense, incurred in connection with the Mergers $ 15,865 $ ( 16,511 ) Estimated increase (decrease) to earnings to reflect payoff of historical debt and issuance of new debt financing in connection with the Mergers $ 23,121 $ ( 18,098 ) Estimated decrease to earnings due to pro forma adjustments for income taxes (1)(2) $ ( 13,605 ) $ ( 21,519 ) (1) For the year ended December 31, 2020, the pro forma tax adjustments primarily reflect the assumption that the combined company placed a valuation allowance on its federal and state deferred tax assets prior to 2020 and the applicability of Base Erosion and Anti-Abuse Tax (“BEAT”) to Xperi tax expense for the period prior to the Mergers. (2) For the year ended December 31, 2019, the pro forma tax adjustments primarily reflect the assumption that the combined company placed a valuation allowance on its federal and state deferred tax assets prior to 2019 and the applicability of BEAT to Xperi’s tax expense. The unaudited supplemental pro forma information above does not include any cost saving synergies from operating efficiencies. NOTE 10 – GOODWILL AND IDENTIFIED INTANGIBLE ASSETS The changes to the carrying value of goodwill from January 1, 2019 through December 31, 2020 are reflected below (in thousands): December 31, 2018 $ 385,784 December 31, 2019 $ 385,784 Goodwill acquired through the Mergers (1) 461,129 Purchase price adjustment related to the Mergers (2) 116 December 31, 2020 (3) $ 847,029 (1) In connection with the TiVo Merger, the Company recorded $ 461.1 million of goodwill, representing the preliminary fair value as of the effective date of the Mergers. See “Note 9 – Business Combination” for additional details . (2) Representing measurement period adjustments primarily related to current indirect taxes payable, current and non-current income taxes receivable and payable, and deferred taxes as additional information was received and tax returns were finalized. See “Note 9 – Business Combination” for additional details . (3) F-36 Of this amount, approximately $ 523.8 million is allocated to the Company’s Product reporting segment and approximately $ 323.2 million is allocated to its IP Licensing reporting segment . Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The process of evaluating goodwill for potential impairment is subjective and requires significant estimates, assumptions and judgments particularly related to the identification of reporting units, the assignment of assets and liabilities to reporting units and estimating the fair value of each reporting unit. During the first quarter of 2020, the COVID-19 pandemic rapidly spread globally and has created unprecedented disruptions in economic activity and financial markets. Due to resulting changes in macroeconomic conditions, industry outlook, and a meaningful decline in the Company’s share price, indicators of potential goodwill impairment were identified. The Company proceeded with a quantitative interim goodwill impairment test as of March 31, 2020. Based on the quantitative assessment, the Company concluded that the fair value of the reporting units exceeded the carrying amount for both Product Licensing and Semiconductor and IP Licensing. As a result, no goodwill impairment charges were recognized in the three months ended March 31, 2020. During the fourth quarter of 2020, the COVID-19 pandemic continued to have a significant and negative impact on business and economic activities in the U.S. and around the world. The resulting global economic downturn had negatively impacted, and was expected to continue to negatively impact, the Company’s consolidated financial results for the remainder of 2020 and into 2021. Due to continued reduction in demand in certain markets and industries, including the automotive market, as well as declines in the Company’s share price, management concluded there were indicators of potential goodwill impairment. The Company proceeded with a quantitative annual goodwill impairment test using the financial information as of September 30, 2020. Based on the quantitative assessment, the Company concluded that the fair value of the reporting units exceeded the carrying amount for both the Product and IP Licensing reporting units. As a result, no goodwill impairment charges were recognized in the three months ended December 31, 2020. In addition, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the impairment testing performed in the fourth quarter of the year ended December 31, 2020. When performing the quantitative goodwill impairment test, the Company first determines the fair value of a reporting unit using weighted results derived from an income approach and a market approach. The fair value using an income approach is estimated through the discounted cash flow method based on assumptions about future conditions such as revenue growth rates, operating expenses, EBITDA, discount rates, and other assumptions. Market approaches used by management include the market comparable method, which estimates the fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value of the reporting unit by utilizing comparable transactions and transaction multiples. Identified intangible assets consisted of the following (in thousands): December 31, 2020 December 31, 2019 Average Life (Years) Gross Assets Accumulated Amortization Net Gross Assets Accumulated Amortization Net Finite-lived intangible assets Acquired patents / core technology (1) 3-15 $ 659,085 $ ( 167,916 ) $ 491,169 $ 151,184 $ ( 135,952 ) $ 15,232 Existing technology / content database (2) (3) 5-10 248,110 ( 169,326 ) 78,784 206,878 ( 130,890 ) 75,988 Customer contracts and related relationships (4) 3-9 650,171 ( 256,199 ) 393,972 291,769 ( 174,741 ) 117,028 Trademarks/trade name 4-10 40,083 ( 21,029 ) 19,054 40,083 ( 16,056 ) 24,027 Non-competition agreements 1 2,231 ( 2,231 ) — 2,231 ( 2,231 ) — Total finite-lived intangible assets 1,599,680 ( 616,701 ) 982,979 692,145 ( 459,870 ) 232,275 Indefinite-lived intangible assets TiVo Tradename/trademarks (5) N/A 21,400 — 21,400 — — — Total intangible assets $ 1,621,080 $ ( 616,701 ) $ 1,004,379 $ 692,145 $ ( 459,870 ) $ 232,275 (1) In June 2020, $ 457.4 million of patents was acquired through the Mergers. See “Note 9 – Business Combination.” (2) In June 2020, $ 34.8 million of existing (developed) technology was acquired through the Mergers. See “Note 9 – Business Combination.” (3) In June 2020, $ 6.2 million of content database was acquired through the Mergers. See “Note 9 – Business Combination.” (4) In June 2020, $ 358.2 million of customer contracts and related relationships was acquired through the Mergers. See “Note 9 – Business Combination.” F-37 (5) In June 2020, $ 21.4 million of TiVo t radename/trademarks was acquired through the Merger s . See “Note 9 – Business Combination .” As of December 31, 2020, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands): 2021 $ 202,453 2022 154,014 2023 143,134 2024 104,330 2025 79,862 Thereafter 299,186 $ 982,979 NOTE 11 – DEBT The outstanding amounts of debt were as follows (in thousands): December 31, 2020 December 31, 2019 2020 Term B Loan Facility $ 873,750 $ — 2021 Convertible Notes 48 — 2018 Amended Term B Loan — 344,000 Unamortized debt discount and issuance costs ( 34,448 ) ( 9,321 ) 839,350 334,679 Less: current portion, net of debt discount and issuance costs ( 43,689 ) — Total long-term debt, net of current portion $ 795,661 $ 334,679 2020 Term B Loan Facility On June 1, 2020, in connection with the consummation of the Mergers with TiVo , the Company entered into a Credit Agreement (the “2020 Credit Agreement”) by and among the Company, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent. The 2020 Credit Agreement provides for a five-year senior secured term loan B facility in an aggregate principal amount of $ 1,050 million (the “2020 Term B Loan Facility”). The interest rate applicable to loans outstanding under the 2020 Term B Loan Facility is equal to, at the Company’s option, either (i) a base rate plus a margin of 3.00 % per annum or (ii) LIBOR plus a margin of 4.00 % per annum. Commencing on September 30, 2020, the 2020 Term B Loan Facility will amortize in equal quarterly installments in aggregate quarterly amounts equal to (i) with respect to repayments occurring on or prior to June 1, 2023, 1.25 % of the original principal amount of the 2020 Term B Loan Facility and (ii) with respect to repayments occurring after June 1, 2023 and prior to June 1, 2025, 1.875 % of the original principal amount of the 2020 Term B Loan Facility, with the balance payable on the maturity date of the 2020 Term B Loan Facility (in each case subject to adjustment for prepayments). The 2020 Term B Loan Facility will mature on June 1, 2025 . Upon the closing of the 2020 Credit Agreement, the Company borrowed $ 1,050 million under the 2020 Term B Loan Facility . Net proceeds were used on June 1, 2020, together with cash and cash equivalents, to refinance the existing indebtedness of the combined Company ( the “Debt Financing ”), including paydown of the TiVo 2019 Term Loan of $ 734.6 million. See “Note 9 – Business Combination” for additional information relating to the Mergers. Additionally, debt discount and issuance costs of approximately $ 39.7 million were incurred and capitalized in connection with the 2020 Term B Loan Facility in June 2020. The Company commenced repaying quarterly installments under the 2020 Term B Loan Facility in the third quarter of 2020, and also elected to make a voluntary principal payment of $ 150.0 million on December 31, 2020. As outlined in the 2020 Credit Agreement, additional cash payments must be made on an annual basis beginning March 31, 2022 based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year. The voluntary principal payment made on December 31, 2020 may be applied against required additional paydowns, if any, beginning March 31, 2022. The obligations under the 2020 Credit Agreement are guaranteed by Xperi, TiVo and certain other of the Company’s wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) pursuant to the Guaranty, dated as of June 1, 2020 (the “Guaranty”), among Xperi, TiVo, the other Guarantors party thereto and Bank of America, N.A., as administrative agent. The F-38 obligations under the 2020 Credit Agreement are secured by a lien on substantially all of the assets of the Company and the Guarantors pursuant to the Security Agreement, dated as of June 1, 2020 (the “Security Agreement”), among the Company, Xperi, TiVo, the other pledgors party thereto and Bank of America, N.A., as collateral agent. The 2020 Credit Agreement contains customary events of default, upon the occurrence of which, after any applicable grace period, the lenders will have the ability to accelerate all outstanding loans thereunder. The 2020 Credit Agreement also contains customary representations and warranties and affirmative and negative covenants that, among other things, restrict the ability of the Company and its subsidiaries to create or incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, transfer or sell assets and make restricted payments. These covenants are subject to a number of limitations and exceptions set forth in the Credit Agreement. The Company was in compliance with all requirements as of December 31, 2020. 2018 Amended Term B Loan On December 1, 2016, in connection with the consummation of the acquisition of DTS, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provided for a $ 600.0 million seven-year term B loan facility (the “Term B Loan Facility”) which was scheduled to mature on November 30, 2023 . Upon the closing of the Credit Agreement, the Company borrowed $ 600.0 million under the Term B Loan facility. Net proceeds were used on December 1, 2016, together with cash and cash equivalents, to finance the acquisition of DTS. On January 23, 2018, the Company and the loan parties entered into an amendment to the Credit Agreement (the “Amendment”). In connection with the Amendment, the Company made a voluntary prepayment of $ 100.0 million of the term loan outstanding under the Credit Agreement using cash on hand. The Amendment provided for, among other things, (i) a replacement of the outstanding initial term loan with the new tranche term B-1 loan (the “2018 Amended Term B Loan”) in a principal amount of $ 494.0 million, (ii) a reduction of the interest rate margin applicable to such loan to (x) in the case of Eurodollar loans, 2.50 % per annum and (y) in the case of base rate loans, 1.50 % per annum, (iii) a prepayment premium of 1.00 % in connection with any repricing transaction with respect to the 2018 Amended Term B Loan within six months of the closing date of the Amendment, and (iv) certain amendments to provide the Company with additional flexibility under the covenant governing restricted payments. Using cash on hand, the Company made three voluntary prepayments totaling $ 150.0 million during 2019. On June 1, 2020, the entire remaining balance of $ 344.0 million was paid off by using the proceeds from the 2020 Term B Loan Facility as part of the TiVo Merger transaction. As a result of the refinancing transaction, the Company recorded a loss on early extinguishment of debt of $ 8.3 million, which consisted of unamortized debt discount and issuance costs, in its Consolidated Statements of Operations for the year ended December 31, 2020. 2019 Term Loan Facility In connection with the Mergers, the Company paid off all outstanding balance under the TiVo 2019 Term Loan. The 2019 Term Loan Facility Agreement was entered into on November 22, 2019 between TiVo, as borrower, and the lenders party thereto and HPS Investment Partners, LLC as administrative agent and collateral agent. Under the 2019 Term Loan, TiVo borrowed $ 715.0 million, which matures on November 22, 2024 . Under the 2019 Term Loan Facility Agreement, TiVo was required to pay a 3.0 % prepayment premium if the loan was prepaid on or prior to November 22, 2020. Further under the same Loan Facility Agreement, the Mergers triggered certain change of control conditions that constitute an event of default, thus requiring the debt to be repaid immediately following the consummation of the Mergers. Using the proceeds from the aforementioned 2020 Term B Loan Facility, the Company, on June 1, 2020, made a full repayment of the 2019 Term Loan along with the prepayment penalty for a total payoff amount of $ 734.6 million. 2021 Convertible Notes Upon consummation of the TiVo Merger on June 1, 2020, the Company assumed $ 48.0 thousand of Convertible Senior Notes that were issued by TiVo Solutions Inc. (“TiVo Solutions”) in September 2014 and mature October 1, 2021 (the “2021 Convertible Notes”). The 2021 Convertible Notes bear interest at an annual rate of 2.0 %, payable semi-annually in arrears on April 1 and October 1 of each year. F-39 Interest Expense and Expected Principal Payments At December 31, 2020, $ 873.8 million was outstanding with an interest rate, including the amortization of debt discount and issuance costs, of 5.1 %. Interest is payable monthly. There were also $ 34.4 million of unamortized debt discount and issuance costs recorded as a reduction of the long-term portion of the debt. At December 31, 2019, $ 344.0 million was outstanding with unamortized debt discount and issuance costs amounting to $ 9.3 million. Interest expense was $ 37.9 million, $ 23.4 million and $ 25.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 6.3 million, $ 2.5 million and $ 2.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, future minimum principal payments for long-term debt, including the current portion, are summarized as follows (in thousands): 2021 $ 52,548 2022 52,500 2023 72,188 2024 78,750 2025 617,812 Total $ 873,798 NOTE 12 – NET INCOME (LOSS) PER SHARE The following table sets forth the computation of basic and diluted shares (in thousands): Years Ended December 31, 2020 2019 2018 Denominator: Weighted average common shares outstanding 82,840 49,120 48,823 Unvested common shares subject to repurchase — — - Total common shares-basic 82,840 49,120 48,823 Effect of dilutive securities: Options 1 — — Restricted stock awards and units 1,015 — — Total common shares-diluted 83,856 49,120 48,823 Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period, excluding any unvested restricted stock awards that are subject to repurchase. Diluted net income (loss) per share is computed using the treasury stock method to calculate the weighted average number of shares of common stock and, if dilutive, potential common shares outstanding during the period. Potentially dilutive common shares include unvested restricted stock awards and units and incremental common shares issuable upon the exercise of stock options, less shares repurchased from assumed proceeds. The assumed proceeds calculation includes actual proceeds to be received from the employee upon exercise and the average unrecognized stock compensation cost during the period. For the year ended December 31, 2020, 2.1 million shares subject to stock options and restricted stock awards and units were excluded from the computation of diluted net income per share as they were anti-dilutive. For each of the years ended December 31, 2019 and 2018, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. A total of 1.3 million and 2.9 million shares subject to stock options and restricted stock awards and units were excluded for the years ended December 31, 2019 and 2018, respectively, from the computation of diluted net loss per share because including them would have been anti-dilutive. NOTE 13 – SHAREHOLDERS’ EQUITY As more fully described in Note 9, Xperi and TiVo completed the Mergers on June 1, 2020 to form Xperi Holding Corporation. Upon completion of the Mergers, each share of common stock of Xperi was converted into the right to receive one fully paid and non-assessable share of Company Common Stock. Further upon completion of the Mergers, each share of TiVo Common Stock was converted into the right to receive 0.455 fully paid and non-assessable shares of the Company Common Stock (the “Exchange Ratio”), in addition to cash in lieu of any fractional shares of the Company Common Stock. Following the Mergers, Xperi Common Stock and TiVo Common Stock were delisted from Nasdaq. Since June 2, 2020, the shares of Company Common Stock have been listed for trading on Nasdaq under ticker symbol “XPER.” F-40 As provided in the Merger Agreement, at the effective time of the Mergers, (i) all options and restricted stock unit awards relating to shares of Xperi Common Stock outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options and restricted stock unit awards respectively, relating to shares of the Company Common Stock on a one-for-one basis and otherwise generally on the same terms and conditions (including vesting exercisability and/or settlement requirements) as applied to such options and awards under the applicable plans and award agreements immediately prior to the effective time of the Mergers, and (ii) all options and restricted stock unit awards relating to shares of TiVo Common Stock that were outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options and restricted stock unit awards, respectively, relating to shares of the Company Common Stock after giving effect to appropriate adjustments to reflect the Mergers (including the Exchange Ratio) and otherwise generally on the same terms and conditions (including vesting exercisability and/or settlement requirements) as applied to such options and awards under the applicable plans and award agreements immediately prior to the effective time of the Mergers. Equity Incentive Plans Prior to the Merger Date, the Company had implemented and granted equity awards under the Xperi Corporation Seventh Amended and Restated 2003 Equity Incentive Plan. As of the effective date of the Mergers, no future grants will be made under the plan. The 2020 EIP In connection with the Mergers and immediately prior to June 1, 2020, the Company adopted the Xperi Holding Corporation 2020 Equity Incentive Plan (the “2020 EIP”). Under the 2020 EIP, the Company may grant equity-based awards to employees, non-employee directors, and consultants for services rendered to the Company (or any parent or subsidiary) in the form of stock options, stock awards, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and performance awards (or any combination thereof). A total of 8,000,000 shares have been reserved for issuance under the 2020 EIP provided that each share issued pursuant to “full value” awards (i.e., stock awards, restricted stock awards, restricted stock units, performance awards and dividend equivalents) are counted against shares available for issuance under the 2020 EIP on a 1.5 to 1 ratio. The 2020 EIP provides for option grants designed as either incentive stock options or nonstatutory options. Options generally are granted with an exercise price not less than the value of the common stock on the grant date and have a term of ten years from the date of grant and vest over a four-year period. The vesting criteria for restricted stock awards and restricted stock units is generally the passage of time or meeting certain performance-based objectives, and continued employment through the vesting period generally over four years for time-based awards. As of December 31, 2020, there were approximately 3.1 million shares reserved for future grant under the 2020 EIP. Assumed Plans On June 1, 2020, the Company assumed all then-outstanding stock options, awards, and shares available and reserved for issuance under all legacy Equity Incentive Plans of TiVo (collectively, the “Assumed Plans”). Stock options assumed from the Assumed Plans generally have vesting periods of four years and a contractual term of seven years . Awards of restricted stock and restricted stock units assumed from the Assumed Plans are generally subject to a four year vesting period. The number of shares subject to stock options and restricted stock unit awards outstanding under these plans are included in the tables below. Shares reserved under the Assumed Plans will be available for future grants. As of December 31, 2020, there were 7.6 million shares reserved for future grants under the Assumed Plan. F-41 A summary of the stock option activity is presented below (in thousands, except per share amounts): Options Outstanding Number of Shares Subject to Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Balance at December 31, 2017 1,172 $ 24.06 Options granted — $ — Options exercised ( 427 ) $ 18.75 Options canceled / forfeited / expired ( 67 ) $ 34.43 Balance at December 31, 2018 678 $ 26.39 Options granted — $ — Options exercised ( 42 ) $ 16.66 Options canceled / forfeited / expired ( 31 ) $ 33.61 Balance at December 31, 2019 605 $ 26.68 Options granted — $ — Options assumed 175 $ 50.96 Options exercised ( 7 ) $ 13.47 Options canceled / forfeited / expired ( 136 ) $ 44.59 Balance at December 31, 2020 637 $ 29.59 2.67 $ 458 Vested and expected to vest at December 31, 2020 636 2.66 $ 458 Exercisable at December 31, 2020 620 2.56 $ 458 The following table summarizes information about stock options outstanding and exercisable under all of the Company’s plans at December 31, 2020: Options Outstanding Options Exercisable Range of Exercise Prices per Share Number Outstanding (in thousands) Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price per Share Number Exercisable (in thousands) Weighted Average Exercise Price per Share $12.52 - $19.24 113 2.63 $ 18.06 113 $ 18.06 $19.34 - $19.73 79 2.56 $ 19.53 79 $ 19.53 $20.21 - $21.30 82 2.84 $ 20.68 82 $ 20.67 $22.19 - $22.24 15 3.30 $ 22.19 15 $ 22.19 $22.45 - $22.45 70 6.79 $ 22.45 53 $ 22.45 $22.52 - $38.65 96 3.83 $ 32.48 96 $ 32.48 $43.54 - $43.63 6 0.57 $ 43.56 6 $ 43.56 $43.77 - $43.77 108 0.13 $ 43.77 108 $ 43.77 $45.90 - $54.60 45 0.73 $ 51.35 45 $ 51.35 $54.69 - $54.69 23 1.16 $ 54.69 23 $ 54.69 $12.52 - $54.69 637 2.67 $ 29.59 620 $ 29.80 F-42 Restricted Stock Awards and Units Information with respect to outstanding restricted stock awards and units as of December 31, 2020 is as follows (in thousands, except per share amounts): Restricted Stock and Restricted Stock Units Number of Shares Subject to Time- based Vesting Number of Shares Subject to Performance- based Vesting Total Number of Shares Weighted Average Grant Date Fair Value Per Share Balance at December 31, 2017 2,014 1,119 3,133 $ 33.35 Awards and units granted 1,087 44 1,131 $ 21.85 Awards and units vested / earned ( 695 ) ( 176 ) ( 871 ) $ 34.84 Awards and units canceled / forfeited ( 257 ) ( 230 ) ( 487 ) $ 29.35 Balance at December 31, 2018 2,149 757 2,906 $ 29.10 Awards and units granted 1,266 4 1,270 $ 22.79 Awards and units vested / earned ( 865 ) ( 118 ) ( 983 ) $ 30.62 Awards and units canceled / forfeited ( 179 ) ( 89 ) ( 268 ) $ 27.53 Balance at December 31, 2019 2,371 554 2,925 $ 25.99 Awards and units granted 3,331 994 4,325 $ 14.64 Awards and units assumed 2,185 253 2,438 $ 13.99 Awards converted 11 ( 11 ) — $ 22.45 Awards and units vested / earned ( 1,676 ) ( 487 ) ( 2,163 ) $ 21.12 Awards and units canceled / forfeited ( 560 ) ( 242 ) ( 802 ) $ 19.96 Balance at December 31, 2020 5,662 1,061 6,723 $ 16.63 Performance Awards and Units Performance awards and units may be granted to employees or consultants based upon, among other things, the contributions, responsibilities and other compensation of the particular employee or consultant. The value and the vesting of such performance awards and units are generally linked to one or more performance goals or certain market conditions determined by the Company, in each case on a specified date or dates or over any period or periods determined by the Company, and may range from zero to 200 percent of the grant. For performance awards subject to a market vesting condition, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition. Employee Stock Purchase Plans Prior to the Mergers, the Company had implemented the Xperi Corporation 2003 Employee Stock Purchase Plan and the International Employee Stock Purchase Plan, both of which were terminated immediately prior to the effective time of the Mergers. In connection with the Mergers and immediately prior to June 1, 2020, the Company adopted the Xperi Holding Corporation 2020 Employee Stock Purchase Plan (the “2020 ESPP”). The 2020 ESPP is implemented through consecutive overlapping 24 -month offering periods, each of which is comprised of four six-month purchase periods. The first offering period commenced on September 1, 2020 and will end on August 31, 2022. Each subsequent offering period under the 2020 ESPP will be twenty-four (24) months long and will commence on each September 1 and March 1 during the term of the plan. Participants may contribute up to 100 % of their base earnings and commissions through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share will equal 85 % of the fair market value per share on the start date of the offering period or, if lower, 85 % of the fair market value per share on the semi-annual purchase date. An eligible employee’s right to buy the Company’s common stock under the 2020 ESPP may not accrue at a rate in excess of $ 25,000 of the fair market value of such shares per calendar year for each calendar year of an offering period. If the fair market value per share of the Company’s common stock on any purchase date during an offering period is less than the fair market value per share on the start date of the 24 -month offering period, then that offering period will automatically terminate and a new 24 -month offering period will begin on the next business day. All participants in the terminated offering will be transferred to the new offering period. F-43 As of December 31, 2020, there were 2.0 million shares reserved for grant under the Company’s 2020 ESPP. Dividends Stockholders of the Company’s common stock are entitled to receive dividends when declared by the Company’s Board of Directors. For the years ended December 31, 2020, 2019 and 2018, dividends declared were $ 0.50 , $ 0.80 , and $ 0.80 per common share, respectively. The capacity to pay dividends in the future depends on many factors, including the Company's financial condition, results of operations, capital requirements, capital structure, industry practice and other business conditions that the Board of Directors considers relevant. Stock Repurchase Programs Following the termination of Xperi’s prior stock repurchase program after the closing of the Mergers, on June 12, 2020 the Board of Directors (the “Board”) of the Company authorized a new stock repurchase program providing for the repurchase of up to $ 150.0 million of the Company's Common Stock dependent on market conditions, share prices and other factors. As of December 31, 2020, the Company has repurchased a total of approximately 4.9 million shares of common stock, since inception of the plan, at an average price of $ 14.25 per share for a total cost of $ 70.1 million. The shares repurchased are recorded as treasury stock and are accounted for under the cost method. No expiration date has been specified for this plan. As of December 31, 2020, the total remaining amount available for repurchase was $ 79.9 million. The Company plans to continue to execute authorized repurchases from time to time under the plan. In connection with the Mergers, all shares repurchased by the Company as of June 1, 2020 and recorded as treasury stock were canceled and retired. The Company accounts for stock repurchases using the cost method and records retirement of treasury stock as a reduction of the cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the retirement of treasury stock is recorded as a reduction of retained earnings. The Company issues restricted stock and restricted stock units (collectively, “restricted awards”) as part of the equity incentive plans described above. For the majority of restricted awards, shares are withheld to satisfy required withholding taxes at the vesting date. Shares withheld to satisfy required withholding taxes in connection with the vesting of restricted awards are treated as common stock repurchases in the consolidated financial statements because they reduce the number of shares that would have been issued on vesting. However, these withheld shares are not included in common stock repurchases under the Company's authorized share repurchase plan. During the years ended December 31, 2020, 2019 and 2018, the Company withheld 0.7 million, 0.2 million and 0.2 million shares of common stock to satisfy $ 10.5 million, $ 4.5 million and $ 3.4 million of required withholding taxes, respectively. NOTE 14 – STOCK-BASED COMPENSATION EXPENSE The effect of recording stock-based compensation expense for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands): Years Ended December 31, 2020 2019 2018 Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets $ 781 $ — $ — Research, development and other related costs 13,592 14,643 13,168 Selling, general and administrative 24,762 16,911 17,843 Total stock-based compensation expense 39,135 31,554 31,011 Tax effect on stock-based compensation expense ( 2,116 ) ( 5,051 ) ( 4,869 ) Net effect on net income (loss) $ 37,019 $ 26,503 $ 26,142 In connection with the Mergers, the Company assumed unvested TiVo equity awards with a fair value of $ 34.1 million, of which $ 22.0 million related to post-acquisition services. For the year ended December 31, 2020, the Company recognized $ 5.8 million associated with the unvested TiVo equity awards assumed. See “Note 9 – Business Combination” for additional detail. F-44 Stock-based compensation expense categorized by various equity components for the years ended December 31, 2020, 2019 and 2018 is summarized in the table below (in thousands): Years Ended December 31, 2020 2019 2018 Restricted stock awards and units $ 36,451 $ 29,031 $ 27,974 Employee stock purchase plan 2,613 2,304 2,599 Employee stock options 71 219 438 Total stock-based compensation expense $ 39,135 $ 31,554 $ 31,011 The total fair value of restricted stock awards and units vested during the years ended December 31, 2020, 2019 and 2018 was $ 45.7 million, $ 30.1 million and $ 30.4 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 0.1 million, $ 0.2 million and $ 1.0 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares. As of December 31, 2020, the unrecognized stock-based compensation balance after estimated forfeitures consisted of $ 0.1 million related to unvested stock options, to be recognized over an estimated weighted average amortization period of 0.8 years, and $ 73.5 million related to restricted stock awards and units, including performance-based awards and units, to be recognized over an estimated weighted average amortization period of 2.7 years. As of December 31, 2019, the unrecognized stock-based compensation balance after estimated forfeitures consisted of $ 0.1 million related to unvested stock options, to be recognized over an estimated weighted average amortization period of 1.5 years, and $ 40.3 million related to restricted stock awards and units, including performance-based awards and units, to be recognized over an estimated weighted average amortization period of 2.3 years. The Company uses the Black-Scholes option pricing model to determine the estimated fair value of options and ESPP shares. The fair value of each option grant is determined on the date of grant and the expense is recorded on a straight-line basis. The assumptions used in the model include expected life, volatility, risk-free interest rate, and dividend yield. The Company’s determinations of these assumptions are outlined below. Expected life – The expected life assumption is based on analysis of the Company’s historical employee exercise patterns. The expected life of options granted under the ESPP represents the offering period of two years . Volatility – Volatility is calculated using the historical volatility of the Company’s common stock for a term consistent with the expected life. Historical volatility of the Company’s common stock is also utilized for the ESPP. Risk-free interest rate – The risk-free interest rate assumption is based on the U.S. Treasury rate for issues with remaining terms similar to the expected life of the options. Dividend yield – Expected dividend yield is calculated based on cash dividends declared by the Board for the previous four quarters and dividing that result by the average closing price of the Company’s common stock for the quarter. Cash dividends are not paid on options, restricted stock units or unvested restricted stock awards. In addition, the Company estimates forfeiture rates. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Historical data is used to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. There were no stock options granted during the years ended December 31, 2020, 2019 and 2018. F-45 The following assumptions were used to value the ESPP shares: Years Ended December 31, 2020 2019 2018 Expected life (years) 2.0 2.0 2.0 Risk-free interest rate 0.1 - 1.4% 1.7 - 2.5% 2.2 - 2.7% Dividend yield 1.4 - 4.0% 3.5 - 5.4% 3.6 - 3.9% Expected volatility 45.8 - 57.5% 51.7 - 53.4% 39.4 - 41.7% For the years ended December 31, 2020, 2019 and 2018, an aggregate of 355,000 , 386,000 and 306,000 common shares, respectively, were purchased pursuant to the ESPP. The Company uses a Monte Carlo simulation to determine the grant date fair value of performance stock units subject to market conditions, or market-based PSUs. The following assumptions were used to value the performance stock units subject to market conditions granted in the year ended December 31, 2020: Year Ended December 31, 2020 Expected life (years) 3.0 Risk-free interest rate 0.2 % Dividend yield 1.4 % Expected volatility 51.3 % There were no market-based PSUs granted during the years ended December 31, 2019 and 2018. Modifications From time to time, the Company enters into consulting agreements with its departing employees. Some of these agreements may include continued vesting of the departing employees’ stock awards and an extension of the exercise period from the standard 90 days from employment termination date to the termination of the consulting agreement. There were no modifications in the years ended December 31, 2020, 2019 and 2018, respectively. NOTE 15 – INCOME TAXES The components of total income (loss) before taxes from continuing operations are as follows (in thousands): Years Ended December 31, 2020 2019 2018 U.S. $ 140,428 $ ( 53,346 ) $ 16,684 Foreign ( 4,519 ) ( 29,711 ) ( 9,774 ) Total income (loss) before taxes from continuing operations $ 135,909 $ ( 83,057 ) $ 6,910 F-46 The provision for (benefit from) income taxes consisted of the following (in thousands): Years Ended December 31, 2020 2019 2018 Current: U.S. federal $ 15,175 $ 68,772 $ 290 Foreign 1,523 ( 42,147 ) 22,668 State and local 10,124 94 10 Total current 26,822 26,719 22,968 Deferred: U.S. federal ( 28,154 ) ( 41,826 ) ( 10,766 ) Foreign ( 1,132 ) ( 4,145 ) ( 3,191 ) State and local ( 5,423 ) 228 ( 338 ) Total deferred ( 34,709 ) ( 45,743 ) ( 14,295 ) Provision for (benefit from) income taxes $ ( 7,887 ) $ ( 19,024 ) $ 8,673 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2020 2019 Deferred tax assets Net operating losses $ 144,064 $ 10,142 Research tax credits 82,378 13,475 Foreign tax credits 106,795 — Expenses not currently deductible 44,232 14,276 Basis difference in fixed and intangible assets 7,206 3,593 Deferred revenue 20,828 — Capitalized research expenses 61,296 23,785 Lease liability 17,995 364 Gross deferred tax assets 484,794 65,635 Valuation allowance ( 287,895 ) ( 37,243 ) Net deferred tax assets 196,899 28,392 Deferred tax liabilities Revenue recognition ( 7,733 ) ( 32,466 ) Operating leases ( 17,535 ) ( 2,665 ) Acquired intangible assets, domestic ( 185,662 ) ( 17,165 ) Acquired intangible assets, foreign ( 33 ) ( 2,171 ) Other ( 3,004 ) — Net deferred tax liabilities $ ( 17,068 ) $ ( 26,075 ) At December 31, 2020 and 2019, the Company had a valuation allowance of $ 287.9 million and $ 37.2 million, respectively, related to federal, state, and foreign deferred tax assets that the Company believes will not be realizable on a more-likely-than-not basis. The $ 250.7 million increase from the prior year is primarily comprised of a net $ 281.7 million increase as a result of the Mergers, offset by a net decrease of $ 31.0 million primarily from the utilization of tax attributes as a result of the Comcast license agreement. The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of the Company’s net deferred tax assets, the Company determined that it was not more-likely-than-not that it would realize its federal, certain state and certain foreign deferred tax assets given the substantial amount of tax attributes that will remain unutilized to offset reversing deferred tax liabilities as of December 31, 2020. The Company intends to continue maintaining a full valuation allowance on its federal deferred tax assets F-47 until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given the Company’s current earnings and anticipated future earnings, the Company believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the federal valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain federal deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve . As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $ 509.2 million and state net operating loss carryforwards of approximately $ 1,133.1 million (post-apportioned). All of the federal net operating loss carryforwards are carried over from TiVo. The state net operating loss carryforwards are carried over from acquired entities, including TiVo in 2020, DTS in 2016, Ziptronix in 2015, and Siimpel Corporation in 2010. The federal net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2021 and will continue to expire through 2035 . The state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2021 and will continue to expire through 2039 . In addition, the Company has research tax credit carryforwards of approximately $ 82.9 million for federal purposes, which were carried over from prior years. The federal research tax credit will start to expire in 2021 and will continue to expire through 2040 . The Company also has research tax credit carryforwards of approximately $ 82.2 million for state purposes and $ 0.6 million for foreign purposes, which do not expire. The Company has $ 128.1 million of foreign tax credit carryforwards which will begin to expire in 2021 and will continue to expire through 2030 . Under the provisions of the Internal Revenue Code, substantial ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized annually in the future to offset taxable income. In addition, for losses generated after December 31, 2017, the Tax Cuts and Jobs Act modified the maximum deduction of net operating loss, eliminated carryback, and provided an indefinite carryforward. A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows: Years Ended December 31, 2020 2019 2018 U.S. federal statutory rate $ 28,541 $ ( 17,442 ) $ 1,451 State, net of federal benefit ( 1,530 ) 281 59 Stock-based compensation expense 2,471 2,807 3,883 Executive compensation limitation 2,132 411 1,538 Research tax credit ( 1,576 ) ( 2,038 ) 248 Foreign withholding tax 9,391 10,328 33,063 Transaction costs 8,216 974 — Foreign tax rate differential 921 1,907 474 Foreign tax credit ( 2,647 ) ( 7,795 ) ( 33,554 ) Change in valuation allowance ( 47,649 ) ( 8,238 ) 7,721 U.S. tax reform ( 1,845 ) ( 2,970 ) ( 6,333 ) Unrecognized tax benefits 3,049 2,994 300 Change in estimates ( 1,355 ) ( 1,300 ) ( 10 ) Foreign exchange ( 7,438 ) — — Others 1,432 1,057 ( 167 ) Total $ ( 7,887 ) $ ( 19,024 ) $ 8,673 At December 31, 2020, the Company asserts that it will not permanently reinvest its foreign earnings outside the U.S. The Company anticipates that the cash from its foreign earnings may be used domestically to fund operations, settle a portion of the outstanding debt obligation, or used for other business needs. The accumulated undistributed earnings generated by its foreign subsidiaries was approximately $ 205.7 million. Substantially all of these earnings will not be taxable upon repatriation to the United States since under the Tax Cuts and Jobs Act they will be treated as previously taxed income from the one-time transition tax, Global Intangible Low-Taxed Income or dividends-received deduction. The withholding taxes related to the distributable cash of the Company’s foreign subsidiaries are not expected to be material. During the fourth quarter of 2019, the Company filed a refund claim for foreign taxes previously withheld from licensees in South Korea based on court rulings in South Korea and other business factors. These previously withheld foreign taxes were claimed as a foreign tax credit in the U.S. As a result of the 2019 refund claim and a planned refund claim for 2020, the F-48 Company recorded $ 123.0 million and $ 65.2 million as a noncurrent income tax receivable at December 31, 2020 and 2019, respectively, $ 62.3 million and $ 48.2 million as a noncurrent income tax payable at December 31, 2020 and 2019, respectively, and $ 36.7 million and $ 17.0 million as a reduction in deferred tax assets at December 31, 2020 and 2019, respectively . As of December 31, 2020, unrecognized tax benefits approximated $ 233.2 million, of which $ 100.4 million would affect the effective tax rate if recognized. As of December 31, 2019, unrecognized tax benefits approximated $ 87.3 million, of which $ 82.9 million would affect the effective tax rate if recognized. The Company believes that its unrecognized tax benefits as of December 31, 2020 will decrease by approximately $ 5.8 million within the next twelve months due to expiring statutes of limitation. The reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands): Years Ended December 31, 2020 2019 2018 Total unrecognized tax benefits at January 1 $ 87,294 $ 33,552 $ 33,506 Increases due to the Mergers 103,443 — — Increases for tax positions related to the current year 46,978 54,823 586 Increases for tax positions related to prior years 2,541 178 — Decreases for tax positions related to prior years ( 7,100 ) ( 1,259 ) ( 540 ) Total unrecognized tax benefits at December 31 $ 233,156 $ 87,294 $ 33,552 It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. For the years ended December 31, 2020, 2019 and 2018, the Company recognized an insignificant amount of interest and penalties related to unrecognized tax benefits. Accrued interest and penalties were $ 2.5 million and $ 1.2 million as of December 31, 2020 and 2019, respectively. At December 31, 2020, the Company’s 2016 through 2019 tax years are generally open and subject to potential examination in one or more jurisdictions. Earlier tax years for the Company and its subsidiaries are also open in certain jurisdictions which are currently subject to examination. In addition, in the U.S., any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination. The Company has submitted a withholding tax refund claim with the South Korean authorities and the final outcome is not anticipated to be settled within the next twelve months. NOTE 16 – COMMITMENTS AND CONTINGENCIES Purchase and Other Contractual Obligations In the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which it is liable in future periods. These arrangements primarily include unconditional purchase obligations to service providers. Total future unconditional purchase obligations as of December 31, 2020 were as follows (in thousands): 2021 $ 41,291 2022 25,654 2023 22,621 2024 10,698 2025 8,292 Thereafter 40,861 Total $ 149,417 Additionally, under certain other contractual arrangements, the Company may be obligated to pay up to $ 3.5 million, a majority of which is expected to be paid in 2021, if certain milestones are achieved. On December 31, 2019, TiVo entered into a contract requiring the Company to generate a minimum number of Qualified Referred Subscribers (as defined in the contract) over a 30 month period. In the event that the aggregate number of Qualified Referred Subscribers generated by the Company within the specified time period is less than the minimum guaranteed subscribers, the Company is required to pay an amount equal to the shortfall between the number of Qualified Referred F-49 Subscribers generated by the Company and the required minimum multiplied by a per Qualified Referred Subscribers fee, up to a maximum of $ 5.0 million. As of December 31, 2020, $ 2.6 million was accrued in the Consolidated Balance Sheets related to this contract. Inventory Purchase Commitment The Company uses contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, the Company enters into agreements with its contract manufacturers that either allow them to procure inventory based on criteria as defined by the Company or that establish the parameters defining the Company’s requirements. A significant portion of the Company’s purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional purchase commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm orders being placed. As of December 31, 2020, the Company had total purchase commitments for inventory of $ 4.2 million, of which $ 0.5 million was accrued in the Consolidated Balance Sheets. Indemnifications In the normal course of business, the Company provides indemnifications of varying scopes and amounts to certain of its licensees, customers, and business partners against claims made by third parties arising from the use of the Company's products, intellectual property, services or technologies. The Company cannot reasonably estimate the possible range of losses that may be incurred pursuant to its indemnification obligations, if any. Variables affecting any such assessment include, but are not limited to: the nature of the claim asserted; the relative merits of the claim; the financial ability of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking indemnification; the nature and amount of damages claimed by the party suing the indemnified party; and the willingness of such party to engage in settlement negotiations. To date, no such claims have been filed against the Company and no liability has been recorded in the Company’s financial statements. As permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company believes, given the absence of any such payments in the Company’s history, and the estimated low probability of such payments in the future, that the estimated fair value of these indemnification agreements is immaterial. In addition, the Company has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable the Company to recover any payments, should they occur. Contingencies At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of losses is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company is currently unable to predict the final outcome of lawsuits to which it is a party and therefore cannot determine the likelihood of loss nor estimate a range of possible losses. An adverse decision in any of these proceedings could significantly harm the Company’s business and consolidated financial position, results of operations or cash flows. The Company and its subsidiaries are involved in litigation matters and claims in the normal course of business. In the past, the Company and its subsidiaries have litigated to enforce their respective patents and other intellectual property rights, to enforce the terms of license agreements, to protect trade secrets, to determine the validity and scope of the proprietary rights of others and to defend itself or its customers against claims of infringement or invalidity. The Company expects it or its subsidiaries will be involved in similar legal proceedings in the future, including proceedings regarding infringement of its patents, and proceedings to ensure proper and full payment of royalties by licensees under the terms of its license agreements. The existing and any future legal actions may harm the Company’s business. For example, legal actions could cause an existing licensee or strategic partner to cease making royalty or other payments to the Company, or to challenge the validity and enforceability of patents owned by the Company’s subsidiaries or the scope of license agreements with the Company’s subsidiaries, or could significantly damage the Company’s relationship with such licensee or strategic partner and, as a result, prevent the adoption of the Company’s other technologies by such licensee or strategic partner. Litigation could also severely disrupt or shut down the business operations of licensees or strategic partners of the Company’s subsidiaries, which in turn would significantly harm ongoing relations with them and cause the Company to lose royalty revenue. F-50 The costs associated with legal proceedings are typically high, relatively unpredictable, and not completely within the Company’s control. These costs may be materially higher than expected, which could adversely affect the Company’s operating results and lead to volatility in the price of its common stock. Whether or not determined in the Company’s favor or ultimately settled, litigation diverts managerial, technical, legal, and financial resources from the Company’s business operations. Furthermore, an adverse decision in any of these legal actions could result in a loss of the Company’s proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from others, limit the value of the Company’s licensed technology or otherwise negatively impact the Company’s stock price or its business and consolidated financial results . NOTE 17 – SEGMENT AND GEOGRAPHIC INFORMATION In connection with the Mergers, the Company re-evaluated its reportable segments. The Company concluded that it has two reportable segments for financial reporting purposes: (1) Product and (2) Intellectual Property (“IP”) Licensing. There are certain corporate overhead costs that are not allocated to these reportable segments because these operating amounts are not considered in evaluating the operating performance of the Company’s business segments. Reportable segments are identified based on the Company's organizational structure and information reviewed by the Company’s chief operating decision maker ("CODM") to evaluate performance and allocate resources. The Company’s Chief Executive Officer is also the CODM as defined by the authoritative guidance on segment reporting. The Product segment consists primarily of licensing Company-developed audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions. Audio, digital radio, imaging solutions and edge-based machine learning include the delivery of software and/or hardware-based solutions to the Company’s consumer electronics (“CE”) customers, automotive manufacturers or their supply chain partners. UX products and services revenue is primarily derived from multi-channel video service providers and CE manufacturers, licensing the TiVo service and selling TiVo-enabled devices like the Stream 4K, Personalized Content Discovery, enriched Metadata, viewership data and advertising. The IP Licensing segment consists primarily of licensing the Company’s innovations to leading companies in the media and semiconductor industries. Licensing arrangements include access to one or more of the Company’s foundational patent portfolios and may also include access to some of its industry-leading technologies and proven know-how. In media, the Company’s licensees include multichannel video programming distributors, OTT video service providers, consumer electronics manufacturers, social media, and other new media companies. In semiconductor, the Company’s licensees include memory, sensors, RF component, and foundry companies. The Company does not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information. Reportable segments do not record inter-segment revenue and accordingly there are none to report. The Company does not allocate other income and expense to reportable segments. Although the CODM uses operating income to evaluate reportable segments, operating costs included in one segment may benefit other segments. F-51 The following table sets forth the Company’s segment revenue, operating expenses and operating income (loss) for the years ended December 31, 2020, 2019 and 2018 (in thousands): Years Ended December 31, 2020 2019 2018 Revenue: Product segment $ 376,101 $ 198,124 $ 218,349 IP Licensing segment 515,919 81,943 187,784 Total revenue 892,020 280,067 406,133 Operating expenses: Product segment 351,913 186,562 185,370 IP Licensing segment 113,363 44,542 74,002 Unallocated operating expenses (1) 249,117 (2) 117,671 122,781 Total operating expenses 714,393 348,775 382,153 Operating income (loss): Product segment 24,188 11,562 32,979 IP Licensing segment 402,556 37,401 113,782 Unallocated operating expenses (1) ( 249,117 ) ( 117,671 ) ( 122,781 ) Total operating income (loss) $ 177,627 $ ( 68,708 ) $ 23,980 (1) Unallocated operating expenses consist primarily of selling, marketing, general and administrative expenses, such as administration, human resources, finance, information technology, corporate development and procurement. These expenses are not allocated because these amounts are not considered in evaluating the operating performance of the Company’s business segments. (2) Includes approximately $ 29.4 million in one-time transaction costs related to the Mergers and $ 14.3 million in post-merger severance and retention costs. Amortization and depreciation are included in segment operating income as shown below (in thousands): Years Ended December 31, 2020 2019 2018 Amortization and depreciation: Product segment $ 111,129 $ 93,402 $ 93,582 IP Licensing segment 59,881 13,264 21,544 Unallocated 3,734 — — Total amortization and depreciation $ 174,744 $ 106,666 $ 115,126 A significant portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., principally in Asia, and it is expected that this revenue will continue to account for a significant portion of total revenues in future periods. The table below lists the geographic revenue for the periods indicated (in thousands): Years Ended December 31, 2020 2019 2018 U.S. $ 548,857 62 % $ 74,469 26 % $ 53,245 13 % Japan 114,195 13 85,833 31 88,513 22 Korea 110,782 12 74,790 27 209,245 51 Europe and Middle East 38,830 4 19,638 7 31,864 8 Other 79,356 9 25,337 9 23,266 6 $ 892,020 100 % $ 280,067 100 % $ 406,133 100 % For the years ended December 31, 2020, 2019 and 2018, one, two, and two customers, respectively, each accounted for 10 % or more of total revenue. F-52 As of December 31, 2020, 2019 and 2018, property and equipment, net, by geographic area are presented below (in thousands): December 31, 2020 2019 2018 U.S. $ 54,818 $ 28,273 $ 29,123 Europe 4,842 4,391 1,533 Asia and other 3,547 213 381 Total $ 63,207 $ 32,877 $ 31,037 NOTE 18 – BENEFIT PLAN The Company maintains a 401(k) retirement savings plan that allows voluntary contributions by all eligible U.S. employees upon their hire date. Eligible employees may elect to contribute up to the maximum amount allowed under Internal Revenue Service regulations. The Company can make discretionary contributions under the 401(k) plan. During the years ended December 31, 2020, 2019 and 2018, the Company contributed approximately $ 4.2 million, $ 3.0 million, and $ 2.9 million, respectively, to the 401(k) plan. NOTE 19 – SUBSEQUENT EVENTS Declaration of a Cash Dividend On February 3, 2021 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on March 30, 2021 , for the stockholders of record at the close of business on March 16, 2021 . F-53 Schedule II. Valuation and Qualifying Accounts for the Years Ended December 31, 2020, 2019 and 2018 (in thousands): Balance at Beginning of Year Charged (Credited) to Expenses Charged (Credited) to Other Accounts Balance at End of Year Deferred income tax asset: Valuation allowance 2018 $ 32,032 $ 2,794 $ 7,116 $ 41,942 2019 $ 41,942 $ ( 4,699 ) $ — $ 37,243 2020 $ 37,243 $ ( 50,838 ) $ 301,490 $ 287,895 F-54 EXHIBIT INDEX Exhibit Number Exhibit Description 2.1* Agreement and Plan of Merger and Reorganization, dated December 18, 2019, by and among the Registrant, TiVo Corporation, XRAY Merger Sub Corporation, TWOLF Merger Sub Corporation and XRAY-TWOLF HoldCo Corporation (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed December 24, 2019, and incorporated herein by reference) 3.1 Certificate of Incorporation of the Company (filed as Exhibit 3.1 to Xperi Holding's Current Report on Form S-4 filed with the SEC on February 18, 2020, and incorporated herein by reference) 3.2 Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 1, 2020, and incorporated herein by reference) 3.3 Bylaws of the Company (filed as Exhibit 3.3 to Xperi Holding's Current Report on Form S-4 filed with the SEC on February 18, 2020, and incorporated herein by reference) 3.4 Amended and Restated Bylaws of the Company, dated May 29, 2020 (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on June 1, 2020, and incorporated herein by reference) 10.1+ Employment and Severance Agreement, dated April 28, 2017, by and between the Registrant and Jon Kirchner (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed August 2, 2017, and incorporated herein by reference) 10.2+ Non-Employee Director Compensation Policy (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed August 2, 2017, and incorporated herein by reference) 10.3 Supplement to Commitment Letter and Fee Letter, dated January 3, 2020, by and among the Registrant, TiVo Corporation, Bank of America, N.A., Royal Bank of Canada, and Barclays Bank PLC (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed January 7, 2020, and incorporated herein by reference) 10.4 Credit Agreement, dated as of June 1, 2020, among the Company, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.5 Guaranty, dated as of June 1, 2020, among Xperi, TiVo, the other subsidiary guarantors party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.6 Security Agreement, dated as of June 1, 2020, among the Company, the other pledgors party thereto and Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.7+ Xperi Holding Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 4.10 of the Company’s Registration Statement on Form S-8 filed with the SEC on June 1, 2020 (File No. 333-238846)) 10.8+ Xperi Holding Corporation 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.11 of the Company’s Registration Statement on Form S-8 filed with the SEC on June 1, 2020 (File No. 333-238846)) 10.9 Form of Indemnification Agreement for Company Directors, Officers, and Key Employees (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.10+ Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement for the Xperi Holding Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.11+ Form of Stock Option Grant Notice and Stock Option Agreement for the Xperi Holding Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.12+ TiVo Corporation 2008 Equity Incentive Plan (f/k/a the “Rovi Corporation 2008 Equity Incentive Plan”) (incorporated by reference to Annex A to the Definitive Proxy Statement on Schedule 14A of TiVo Corporation, filed March 15, 2019 (File No. 001-37870)) 10.13+ TiVo Inc. Amended and Restated 2008 Equity Incentive Award Plan (now named the “TiVo Corporation Titan Equity Incentive Award Plan”) (incorporated by reference to Exhibit 4.7 to Registration Statement on Form S-8 of TiVo Corporation, filed September 9, 2016 (File No. 333-213578)) 10.14+ Xperi Corporation Seventh Amended and Restated 2003 Equity Incentive Plan and Amendment No. 1 (incorporated by reference to Appendices A and B to Additional Definitive Proxy Soliciting Materials on Schedule 14A of Xperi Corporation, filed April 18, 2018 (File No. 001-37956)) 131 10. 15 + DTS, Inc. 2014 New Employee Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of DTS, Inc., filed August 20, 2014 (File No. 000-50335)) 10.16+ Amendment No. 1 to the DTS, Inc. 2014 New Employee Incentive Plan (incorporated by reference to Exhibit 99.3 to Registration Statement on Form S-8 of DTS, Inc., filed August 10, 2015 (File No. 333-206283)) 10.17+ Amendment No. 2 to the DTS, Inc. 2014 New Employee Incentive Plan (incorporated by reference to Exhibit 99.3 to Registration Statement on Form S-8 of DTS, Inc., filed November 9, 2015 (File No. 333-207899)) 10.18+ DTS, Inc. 2012 Equity Incentive Plan and Amendment No. 1 (incorporated by reference to Appendix A to Definitive Proxy Statement on Schedule 14A of DTS, Inc., filed April 14, 2015 (File No. 000-50335)) 10.19+ SRS Labs, Inc. 2006 Stock Incentive Plan, as amended and restated on August 9, 2012 (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-8 of DTS, Inc., filed August 13, 2012 (File No. 333-183289)) 10.20+ DTS, Inc. 2003 Equity Incentive Plan, as amended on May 9, 2005, May 15, 2008, February 19, 2009, February 15, 2010, June 3, 2010 and October 8, 2010 (incorporated by reference to Exhibit 10.1 to Form 10-Q of DTS, Inc., filed November 8, 2010 (File No. 000-50335)) 10.21 Form of Severance Agreement, dated September 29, 2020, between the Company and each of Robert Andersen, Geir Skaaden, Paul Davis, Matthew Milne, and Michael Hawkey (incorporated by reference to Exhibit 10.1 to Form 10-Q of Xperi Holding Corporation, filed November 9, 2020) 10.22 Form of Change in Control Severance Agreement, dated as of September 29, 2020, between the Company and each of Robert Andersen, Geir Skaaden, Paul Davis, Matthew Milne, and Michael Hawkey (incorporated by reference to Exhibit 10.2 to Form 10-Q of Xperi Holding Corporation, filed November 9, 2020) 10.23 Amendment to Employment and Severance Agreement between Xperi Corporation and Jon Kirchner dated April 28, 2017, effective as of September 29, 2020 (incorporated by reference to Exhibit 10.3 to Form 10-Q of Xperi Holding Corporation, filed November 9, 2020) 21.1 List of subsidiaries 23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page to this Annual Report on Form 10-K) 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Stipulation and (Proposed) Order Regarding Mootness Fee Request, Notice, and Dismissal 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) + Indicates a management contract or compensatory plan or arrangement. * The exhibits and schedules to this agreement have been omitted in reliance on Item 601(b)(2) of Regulation S-K promulgated by the SEC, and a copy thereof will be furnished supplementally to the SEC upon its request. Readers are cautioned that the representations and warranties set forth in this agreement are qualified by those schedules, and should not be relied upon as accurate or complete without reference to those schedules 132 Item 16. Form 10-K Summary None. 133 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 26, 2021 Xperi Holding Corporation By: /s/ Jon Kirchner Jon Kirchner Chief Executive Officer and President POWER OF ATTORNEY Each person whose individual signature appears below hereby authorizes and appoints Jon Kirchner and Robert Andersen, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his true and lawful attorney-in-fact and agent to act in his name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jon Kirchner Chief Executive Officer, President and Director Jon Kirchner (Principal Executive Officer) February 26, 2021 /s/ Robert J. Andersen Chief Financial Officer (Principal Financial and Robert J. Andersen Accounting Officer) February 26, 2021 /s/ Dave Habiger Dave Habiger Chairman of the Board of Directors February 26, 2021 /s/ Darcy Antonellis Darcy Antonellis Director February 26, 2021 /s/ Laura Durr Laura Durr Director February 26, 2021 /s/ Daniel Moloney Daniel Moloney Director February 26, 2021 /s/ Raghavendra Rau Raghavendra Rau Director February 26, 2021 /s/ Christopher A. Seams Christopher A. Seams Director February 26, 2021 134